At the end of $2023,$ ABC company had total sales $$15$ million. They had $300,000$ shares outstanding. We

expect sales growth to be $8\%$ per year for the next $5$ years. After that we expect sales growth to be $4\%$

into perpetuity. The company$$s profit margin is $24\%$ and the company has a return on equity of $16\%.$

The cost of equity is $11\%.$

Forecast:

$1)$ Sales per Share

$2)$ Profit $($earnings per share$)$

$3)$ Free cash flow to equity $($per share$)$ for the next $5$ years, along with a terminal value beyond the

$5$ years.

$4)$ Determine the intrinsic value of the stock.

$5)$ How much of the intrinsic value comes from our estimate of future growth $($PVGO$)?$

FCFF

Given the following information about a company:

$$ Sales for the year that just ended: $$5$ billion

$$ Sales growth:

o Sales growth for next $5$ years: $7\%$

o Sales growth after Year $5$: $3\mathrm{.}5\%$

$$ Operating margins $=25\%$

$$ Tax rate $=23$ percent

$$ Net margins $=16\%$

$$ Market Value of Debt $=$ $$1$ billion

$$ Pre$-$tax cost of debt $=7\%$

$$ Number of shares outstanding $=1$ billion

$$ Book value of equity: $$17$ billion

$$ Book value of assets: $$20$ billion

$$ Percentage of NOPAT that must be reinvested:

o Reinvestment rate Years $14$: $21\%$

o Reinvestment rate after Year $4$: $15\%$

$$ Market value of equity: $$18$ billion

$$ Cost of Equity $=13\%$

Forecast: Sales, EBIT, Taxes, NOPAT, Reinvestment, FCFF and terminal value. Calculate the WACC and

then calculate present values to determine the firm$$s Enterprise Value $($EV$).$ From EV$,$ determine the

intrinsic value per share of stock. Be careful to maintain the same weight on debt and equity when

calculating the intrinsic value.