Bay Motors is a start-up making electric motors for automobiles. It's 2022 FCF was $50 million; the FCF is expected to grow at a constant rate of 5%. The firms WACC is 10%, and it has 1 million shares of common stock privately held by the firm's founders. The firm has $30 million in short-term investments, the firm has no other nonoperating assets. It has $300 million in debt.
a. What is the intrinsic value of the company per share? (50)/(1 + .5)^1 + (CF2)/(1 + r)^2 + (CF3)/(1 + r)^3 + ... + (CFn)/(1 + r)^n
b. Bay Motors plans to do an IPO. As a part of the deal, it will do a 5 to 1 stock split, then sell 80% of the stock to the public. Flotation costs are 8%. What is going to be the fair offer price per share?
c. Assuming that the stock price is as in part b, suppose that Bay Motors plans to repurchase some of its outstanding stock. They plan to spend $50 million for that, and they would have to pay a 5% premium over the market price to purchase this many shares within a short time period. How many shares would they repurchase, and what will be the intrinsic share price after the repurchase?