Question

IDX Technologies is a privately held developer of advanced security systems based in Chicago. As part of your business development​ strategy, in late 2013 you initiate discussions with​ IDX's founder about the possibility of acquiring the business at the end of 2013. Estimate the value of IDX per share using a discounted FCF approach and the following​ data:

bullet ​Debt: $ 34 million

bullet Excess​ cash: $ 101 million

bullet Shares​ outstanding: 50 million

bullet Expected FCF in​ 2014: $ 43 million

bullet Expected FCF in​ 2015: $ 57 million

bullet Future FCF growth rate beyond​ 2015: 5 %

bullet ​Weighted-average cost of​ capital: 9.4 %

The enterprise value in 2013 is ​$ ( )million (Round to two decimal​ places.)

The equity value is $ ( )million (Round to two decimal​ places.)

The value of IDX per share is ​$ ( )  (Round to two decimal​ places.)

Answer 1

	Required rate	9.40%
Year	Previous year dividend	FCF growth rate	FCF current year	Horizon value	Total Value	Discount factor	Discounted value
1	0	0%	43		43	1.094	39.3053
2	43	0%	57	606.383	663.383	1.197	554.20468
	Long term growth rate =	0%			Value of Firm =	Sum of discounted value =	593.51

Where
Current dividend =	Previous year dividend*(1+growth rate)^corresponding year
Unless dividend for the year provided
Total value = FCF	+ horizon value (only for last year)
Horizon value =	current FCF year 2 *(1+long term growth rate)/( required rate-long term growth rate)
Discount factor=	(1+ required rate)^corresponding period
Discounted value=	total value/discount factor

enterprise value = 593.51million

equity value = enterprise value-Debt+cash = 593.51-34+101=660.51 million

share value = equity/share number = 660.51/50=13.21