You are building free cash flow to the firm model. You expect sales to grow from $1

Question:

You are building free cash flow to the firm model. You expect sales to grow from $1 billion for the year that just ended to $2 billion five years from now. Assume that the company will not become any more or less efficient in the future. Use the following information to calculate the value of the equity on a per-share basis.

a. Assume that the company currently has $5300 million of net PP&E.

b. The company currently has $100 million of net working capital.

c. The company has operating margins of 10 percent and has an effective tax rate of 28 percent.

d. The company has a weighted average cost of capital of 9 percent. This is based on a capital structure of two-thirds equity and one-third debt.

Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...

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