D E H 1 2 Problem 7-19 Heavy Metal Corporation is expected to generate the following free cash flows over the next five years 4 5 6 Year FCF (million) 7 1 $53 2 $68 3 $78 4 $75 5 $82 8 9 After then, the free cash flows are expected to grow at the inchustry average of 4% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14% a. Estimate the enterprise value of Heavy Metal b. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimate its share price 10 11 12 13 Cost of capital Long-run growth rate 14.00% 4.00% 14 15 16 Year 4 FCF (million) $53.00 2 $68.00 17 18 19 $78,00 $75.00 5 $82.00 Terminal value (million) Total cash flow (million) 20 $53.00 S68.00 $78.00 21 22 23 24 a. Estimate the enterprise value of Heavy Metal 25 26 Enterprise value (million) b. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimate its share price Debt (million) $300.00 Number of shares (million) 27 28 40 30 Equity value (milion) Stock price 7-19 1. Start Excel - completed. 2. In cell G19, by using cell references, calculate the terminal value of the company at the end of year 4 (1 pt.). 3. In cell G20, by using cell references, calculate the total cash flow for year 4 (1 pt.). 4. To calculate the enterprise value of the company, you will use the function NPV. In cell D24, by using the function NPV and cell 5. In cell D31, by using cell references, calculate the equity value of the company (1 pt.). 6. In cell D32, by using cell references, calculate the stock price (1 pt.). 7. Save the workbook. Close the workbook and then exit Excel. Submit the workbook as directed