Question

In: Finance

Complex finance problem using Excel Valuing Copperhead Corporation: Use the FCF valuation method with multiple growth...

Complex finance problem using Excel

Valuing Copperhead Corporation: Use the FCF valuation method with multiple growth rates for Copperhead Corporation, a rapidly-growing service firm. Here are the relevant data necessary to calculate the share price value of Copperhead, utilizing the Valuation Method 2: The Price of a Share Is the Discounted Value of the Future Anticipated FCFs.

Valuing Copperhead Corporation

2014 FCF (base year)

$2,500,000

High growth rate, ghigh

30%

Normal growth rate, gnormal

11%

Number of high-growth years

5

WACC

18%

End-2014 debt

$3,500,000

End-2014 cash

$1,750,000

Number of shares (end-2014)

2,400,000

Solutions

Expert Solution

WACC= 18.00%
Year Previous year FCF FCF growth rate FCF current year Horizon value Total Value Discount factor Discounted value
1 2500000 30.00% 3250000 3250000 1.18 2754237.288
2 3250000 30.00% 4225000 4225000 1.3924 3034329.216
3 4225000 30.00% 5492500 5492500 1.643032 3342905.068
4 5492500 30.00% 7140250 7140250 1.93877776 3682861.516
5 7140250 30.00% 9282325 147191153.6 156473478.6 2.287757757 68395999.58
Long term growth rate (given)= 11.00% Value of Enterprise = Sum of discounted value = 81210332.67
Where
Current FCF =Previous year FCF*(1+growth rate)^corresponding year
Total value = FCF + horizon value (only for last year)
Horizon value = FCF current year 5 *(1+long term growth rate)/( WACC-long term growth rate)
Discount factor=(1+ WACC)^corresponding period
Discounted value=total value/discount factor
Enterprise value = Equity value+ MV of debt
- Cash & Cash Equivalents
81210332.67 = Equity value+3500000-1750000
Equity value = 79460332.67
share price = equity value/number of shares
share price = 79460332.67/2400000
share price = 33.11

Related Solutions

Why DDM and DCF valuation method are suitable/okay to use for valuing airlines ?
Why DDM and DCF valuation method are suitable/okay to use for valuing airlines ?
excel problem Find the roots of the functions given using the bisection method. Use the graph...
excel problem Find the roots of the functions given using the bisection method. Use the graph of each function to choose points that bracket the root of interest. a. f(x) x-x^1/3-2 b.f(x)=xtanx-1 c.f(x)=x^4-e^x+1 d.f(x)x^2e^x-1
Complex finance problems using Excel. Compost International issued $1000 bonds on May 12, 2000 in order...
Complex finance problems using Excel. Compost International issued $1000 bonds on May 12, 2000 in order to finance world-wide expansion. The bonds have a coupon rate of 8.4% with payments on a semi-annual basis (November 12, May 12) and mature on May 12, 2020. You purchased one of Compost’s $1000 bond on June 25, 2004 and plan to hold the bond to maturity. The bond has a list price of $1090 (not including accrued interest). Compute the semi-annual coupon payment,...
Using the free cash flow valuation model to price an IPO Personal Finance Problem Assume that...
Using the free cash flow valuation model to price an IPO Personal Finance Problem Assume that it is the end of the year 2015 and you have an opportunity to buy the stock of CoolTech, Inc., an IPO being offered for $2.13 per share. Although you are very much interested in owning the company, you are concerned about whether it is fairly priced. To determine the value of the shares, you have decided to apply the free cash flow valuation...
Using the free cash flow valuation model to price an IPO  Personal Finance Problem   Assume that...
Using the free cash flow valuation model to price an IPO  Personal Finance Problem   Assume that it is the end of year 2015 and you have an opportunity to buy the stock of​ CoolTech, Inc., an IPO being offered for ​$4.33 per share. Although you are very much interested in owning the​ company, you are concerned about whether it is fairly priced. To determine the value of the​ shares, you have decided to apply the free cash flow valuation model...
Using the free cash flow valuation model to price an IPO  Personal Finance Problem   Assume that...
Using the free cash flow valuation model to price an IPO  Personal Finance Problem   Assume that it is the end of year 2015 and you have an opportunity to buy the stock of​ CoolTech, Inc., an IPO being offered for ​$4.33 per share. Although you are very much interested in owning the​ company, you are concerned about whether it is fairly priced. To determine the value of the​ shares, you have decided to apply the free cash flow valuation model...
Using the free cash flow valuation model to price an IPO  Personal Finance Problem   Assume that...
Using the free cash flow valuation model to price an IPO  Personal Finance Problem   Assume that you have an opportunity to buy the stock of​ CoolTech, Inc., an IPO being offered for ​$5.12 per share. Although you are very much interested in owning the​ company, you are concerned about whether it is fairly priced. To determine the value of the​ shares, you have decided to apply the free cash flow valuation model to the​ firm's financial data that​ you've accumulated...
The contingent valuation method is, in general, superior to indirect methods for valuing non-market environmental goods...
The contingent valuation method is, in general, superior to indirect methods for valuing non-market environmental goods and services because it is the only technique that can incorporate use as well as non-use values. Discuss (approximately 800 words)
What valuation model is best used when valuing companies with temporarily high growth rates? Why?
What valuation model is best used when valuing companies with temporarily high growth rates? Why?
USING EXCEL FORMULAS SOLVE THE PROBLEM. MUST USE EXCEL CALCULATIONS AND FORMULAS.!!! Find the data for...
USING EXCEL FORMULAS SOLVE THE PROBLEM. MUST USE EXCEL CALCULATIONS AND FORMULAS.!!! Find the data for the problem in the first worksheet named LightbulbLife of the data table down below It gives the data on the lifetime in hours of a sample of 50 lightbulbs. The company manufacturing these bulbs wants to know whether it can claim that its lightbulbs typically last more than 1000 burning hours. So it did a study. Identify the null and the alternate hypotheses for...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT