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You are valuing Soda City Inc. It has $118 million of debt, $83 million of cash,...
You are valuing Soda City Inc. It has $118 million of debt, $83 million of cash, and 168 million shares outstanding. You estimate its cost of capital is 11.2%. You forecast that it will generate revenues of $714 million and $786 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 27%, tax rate is 26%, reinvestment rate is 34%, and terminal EV/FCFF exit multiple at the end of year 2 is 13. What is your estimate of its share price? Round to one decimal place.
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Expert Solution
| PARTICULARS | YEAR 1 | YEARS2 |
| $ in millions | $ in millions | |
| REVENUE | 714.0000 | 786.0000 |
| OPERATING INCOME[EBITA] (REVENUE * OPERATING MARGIN(27%)) | 192.7800 | 212.2200 |
| NOPAT [EBITA * (1-TAX(26%)] | 142.6572 | 157.0428 |
| Operating Free-Cash Flow(FCF) to Entity {NOPAT (1-Reinvestment rate(34%))} | 94.1538 | 103.6482 |
| Discounting factor @11.2% | 0.899281 | 0.808706 |
| PV of FCF @Cost of Capital 11.2% | 84.6706 | 83.8209 |
| Terminal value= FCFF Year 2 * Exit multiple | 1347.4272 | |
| Enterprises Value | 1258.1634 | |
| NOPAT=NET OPERATING PROFUT AFTER TAX | ||
| Market value of debt | 118.0000 | |
| Cash | 83.0000 | |
| Enterprises Value | 1258.1634 | |
| Value of equity | 1223.1634 | |
| number of share | 168.0000 | |
| value of per share | 7.3 |
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