25 - For 2023, Volant Inc. is forecast to have Free Cash Flow to the Firm of $1.7 million and Free Cash Flow to Common Equity of $1.3 million. You forecast Free Cash Flow to the Firm to grow at a constant rate of 3.50% while Free Cash Flow to Common Equity grows at 4.00%. Volant’s tax rate is forecast to be 25%.  You also collect the data shown below.

 

                                    Book Value       Market Value

Debt                       $14.5 million    $15.0 million    YTM:    4.24%

      Common Equity      $21.0 million    $45.0 million    Rate of Return: 7.00%

 

      Calculate Volant’s Weighted Average Cost of Capital and round to 1 basis point.

1. For 2023, Volant Inc. is forecast to have Free Cash Flow to the Firm of $1.7 million and Free Cash Flow to Common Equity of $1.3 million. You forecast Free Cash Flow to the Firm to grow at a constant rate of 3.50% while Free Cash Flow to Common Equity grows at 4.00%. Volant’s tax rate is forecast to be 25%. You also collect the data shown below.

Book Value Market Value

Debt $14.5 million $15.0 million YTM: 4.24%

Common Equity $21.0 million $45.0 million Rate of Return: 7.00%

Calculate Volant’s Weighted Average Cost of Capital and round to 1 basis point.

2. Using the information in question 25, calculate the intrinsic value of Volant’s common equity using Free Cash Flow to the Firm. Answer in millions and round to one decimal.

IV:

3. Using the information in question 25, calculate the intrinsic value of Volant’s common equity using Free Cash Flow to Common Equity. Round to 2 decimals.