b. Estimate the Enterprise Value of Lockheed (value of the firms operations).

c. Lockheed has $800 million in cash. Estimate the Market Value of Equity and estimate the intrinsic share price of Lockheed.

d. If you had to make a recommendation on this stock based on your estimation of its intrinsic value, what would it be? Briefly explain your recommendation for the stock of the company. (As a reminder, stock is currently trading at $250 per share).

e. Assume that today is December 31, 2023, and that the following information applies to Abner Airlines, a relatively mature company:

• After-tax operating income [EBIT(1-T)] for the end of year 2023 was $600 million.
• The depreciation expense for 2023 was $140 million.
• The capital expenditure for 2023 was $225 million.
• No change in net operating working capital
• The free cash flow is expected to grow at a constant rate of 3.5% per year perpetually
• The cost of equity is 14%
• The weighted average cost of capital (WACC) is 10%
• The market value of the companys debt is $3.875 billion
• 200 million shares of stock are outstanding.

What should be the intrinsic value of the stocks price?

(earnings before interest, taxes, depreciation, and amortization) of $4,000 million in 2023 , prior to interest expenses of $1,000 million and depreciation charges of $600 million. Capital expenditures in 2023 amounted to $1,000 million, and working capital required was approximately 8% of revenues (which was $20,000 million). The change in our working capital from year to year will represent our investment in working capital. The tax rate for the firm is 21%. The firm has debt outstanding trading at a market value of $20.0 billion and yield a pre-tax interest rate of 8%. There are 100 million shares outstanding, trading at $250 per share, and the most recent beta was 1.20 . The Treasury bond rate is 3%, and the market risk premium is 6.5%. The pre-tax interest rate, tax rate, beta, treasury bond rate, market risk premium, market value of debt and market value of equity are used to estimate a weighted average cost of capital (WACC) of approximately 8.8%. (I have estimated the WACC or discount rate for you using the cost of debt, cost of equity and the information in the preceding two paragraphs.) The firm expects revenues, earnings (EBITDA) and depreciation to grow at 10% a year from 2023 to 2026, after which the growth rate is expected to drop to 3% a year forever. Capital expenditures will also grow at 10% a year from 2023 to 2026, but capital spending will be 120% of depreciation in the steadv/terminal state period. The working capital required will continue to be 8% of revenues as shown in the table below (table has been provided as a guide to help you organize your work and get to the Free Cash Flow to the Firm)