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.

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

jeff jeffy answered 1 year ago

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You are valuing Soda City Inc. It has $118 million of debt, $83 million of cash,...

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