Respuesta :
Answer:
The expected current share price is $7.66
Explanation:
According to the given data, we have the following:
FCF1 = $22 million
FCF2 = $24 million
FCF3 = $29 million
FCF4 = $32 million
FCF5 = $35 million
Growth Rate, g = 2%
WACC = 7%
In order to calculate the expected current share price we have to calculate first the following:
First, we have to calculate the FCF6 as follows:
FCF6 = FCF5 * (1 + g)
FCF6 = $35 million * 1.02
FCF6 = $35.70 million
Next, we have to calculate the Horizon Value of Firm as follows:
Horizon Value of Firm = FCF6 / (WACC - g)
Horizon Value of Firm = $35.70 million / (0.07 - 0.02)
Horizon Value of Firm = $714 million
Next, we have to calculate the Current Value of Firm as follows:
20,560,747+20,962,529+23,672,638+24,412,646+24,954,516+509,072,132
Current Value of Firm = $22 million / 1.07 + $24 million / 1.07^2 + $29 million / 1.07^3 + $32 million / 1.07^4 + $35 million / 1.07^5 + $714 million / 1.07^5
Current Value of Firm = $623.63 million
Next, we have to calculate the Value of Equity as follows:
Value of Equity = Current Value of Firm - Value of Debt + Value of Cash
Value of Equity = $623.63 million - $40.00 million + $14.00 million
Value of Equity = $597.63 million
Therefore, the Price per share = Value of Equity / Number of shares outstanding
Price per share = $597.63 million / 78 million
Price per share = $7.66
The expected current share price is $7.66
Answer:
Expected current share price = $7.66
Explanation:
Given Data:
Free Cash Flow(FCF1) = $22 million
FCF2 = $24 million
FCF3 = $29 million
FCF4 = $32 million
FCF5 = $35 million
grow rate (g) = 2%
cost of capital (r) =
XYZ cash = $14 million
XYZ debt = $40 million
Shares = 78 million
Calculating the current share price using the formula;
Share Price = Equity / No. of shares
Before substituting into the formula, the following are calculated;
Terminal Value in year 5, P5 = FCF5 x (1 + g) / (r - g)
= 35 x (1 + 2%) / (7% - 2%)
= $714 million
Present Value = FCF1 / (1 + r) + FCF2 / (1 + r)^2 + FCF3 / (1 + r)^3 + FCF4 / (1 + r)^4 + (FCF5 + P5) / (1 + r)^5
=22/ (1 + 7%) +24/(1 + 7%)^2 +29/(1 + 7%)^3 +32/(1 + 7%)^4 +(35 + 714)/(1+7%)^5
= 22 / 1.07 + 24 / 1.07^2 + 29 / 1.07^3 + 32 / 1.07^4 + (749) / 1.07^5
= 20.56 + 20.96 + 23.67 + 24.41 + 534.03
= $623.63 million
Equity Value = present value + Cash - Debt
= 623.63 + 14 - 40
= $597.63 million
Calculating the current share price, we have;
Share Price = Equity / No. of shares
= 597.63 / 78
= $7.66
Therefore, the general Industries' expected current share price = $7.66
