Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Determine the intrinsic stock price of a firm using the following assumptions. The forecast period is five years. At the end of five years, you

Determine the intrinsic stock price of a firm using the following assumptions. The forecast period is five years. At the end of five years, you should calculate a residual value using the growth perpetuity method.

Sales (last historical period)

$67,420 million

Sales growth rate (%)

10.0

COGS (% of sales)

72.0

SG&A (% of sales)

22.75

Depreciation (% of sales)

1.5 **

Cash income tax rate

37.0%

Capital expenditures (% of sales)

2.75

Net working capital (last historical period)

$2,480 million

Inventory Turnover (COGS)

6.6x

Ave. Collection Period (360)

13.5 days

Days Payable Outstanding (360)

34 days

Accruals (% of sales)

4.0

Long-term FCF growth rate (%)

5.0

Cost of capital (%)

8.75

**Depreciation expense is already included in COGS and/or SG&A. Note: For this firm, net working capital should be calculated as accounts receivable plus inventory minus (accounts payable + accruals). Assume the firm has $4,454 million debt outstanding and no surplus cash. If the firm has 938.6 million shares outstanding, what is the intrinsic share price?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Project Financing Financial Instruments And Risk Management

Authors: Frank J Fabozzi, Carmel De Nahlik

1st Edition

9811231494, 9789811231490

More Books

Students also viewed these Finance questions

Question

Find the Fourier transform of the waveform shown in Fig. 18.29. N2

Answered: 1 week ago

Question

please answer all parts of the question

Answered: 1 week ago