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d. Calculate the current value of operations. (Hint: First calculate the horizon value at the end of the forecast period, which is equal to the
| d. Calculate the current value of operations. (Hint: First calculate the horizon value at the end of the forecast period, which is equal to the value of operations at the end of the forecast period. Assume that the annual growth rate beyond the horizon is equal to the growth rate at the horizon.) How does the current value of operations compare with the current amount of total net operating capital? | |||||
| Weighted average cost of capital (WACC) | 10.5% | ||||
| Actual | Projected | Projected | Projected | Projected | |
| 12/31/2016 | 12/31/17 | 12/31/18 | 12/31/19 | 12/31/20 | |
| Free cash flow | |||||
| Long-term constant growth in FCF | |||||
| Horizon value | |||||
| Present value of horizon value | |||||
| Present value of forecasted FCF | |||||
| Value of operations (]PV of HV] + [PV of FCF]) | |||||
| Total net operating capital | |||||
| e. Calculate the price per share of common equity as of 12/31/2016 | |||||
| Millions except price per share | Actual | ||||
| 12/31/2016 | |||||
| Value of operations | |||||
| + Value of short-term investments | |||||
| Total value of company | |||||
| Total value of all debt | |||||
| Value of preferred stock | |||||
| Value of common equity | |||||
| Divided by number of shares | |||||
| Price per share | |||||
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
