FCFE Model where Earnings are expected to be depressed in the future. Due to this expected depression of earnings, must "normalize earnings" The TerrificTelephone Company is in an industry approaching maturity. It is not likely that TerrificTelephone will be able to regsiter above normal grwoth over time. This dividend is much less than it generates in FCFE. Leverage is stable. No information about the payment or nonpayment of Dividends. No information about the FCFE per share amount. Current financial available data is: Debt Financing ratio Return on Equity (ROE) Book Value of Equity Depreciation Expense Shares outstanding Working Capital \% Requirements based on total revenue Capital Expenditures Revenues Earnings, capital expenditures, and depreciation are all expected to grow at The beta of the stock is The Teasury bond rate The Risk Premium is Required Rate of Return Expected growth rate in FCFE Actual Market Value FCFEo = Net Cash Flows from Operations - Net long-term capital investment activity + Net long-term borrowings. We need to rewrite the FCFE model to "fit" out data. FCFE=NormalizedNetIncome((WC)(1Debtratio)-(capitalexpenditurespershare-depreciationpershare)*(1-DebtRatio)wherenormalizednetincome=BookValueofEquity*ROE **All yellow cells must contain a number Intrinsic value per share Template for Problems \#3 and \#4 Normalized Net Income Capital Expenditures Depreciation Working Capital Expected Growth Rate in FCFE (WC*g)*(1-debt ratio) (NetCapitalexpenditure)*(1-debt ratio) FCFE 0 FCFE 1 Capitalization Rate Aggregate Dollar intrinsic value Intrinsic value per share Acutal Market Price Over or Under Valued Stock This is problem \#4. a. Intrinsic Value of Terrific Telephone stock is approximately =$416.60 Based upon the market value of $423.00, Terrific Telephone is over Valued. d. B Intrinsic Value of Terrific Telephone stock is approximately =$516.60 Based upon the market value of $423.00, Terrific Telephone is Over Valued. b. Intrinsic Value of Terrific Telephone stock is approximately =$641.60 Based upon the market value of $423.00, Terrific Telephone is Under Valued. C. (D) Intrinsic Value of Terrific Telephone stock is approximately =$164.60 Based upon the market value of $423.00, Terrific Telephone is Over Valued. FCFE Model where Earnings are expected to be depressed in the future. Due to this expected depression of earnings, must "normalize earnings" The TerrificTelephone Company is in an industry approaching maturity. It is not likely that TerrificTelephone will be able to regsiter above normal grwoth over time. This dividend is much less than it generates in FCFE. Leverage is stable. No information about the payment or nonpayment of Dividends. No information about the FCFE per share amount. Current financial available data is: Debt Financing ratio Return on Equity (ROE) Book Value of Equity Depreciation Expense Shares outstanding Working Capital \% Requirements based on total revenue Capital Expenditures Revenues Earnings, capital expenditures, and depreciation are all expected to grow at The beta of the stock is The Teasury bond rate The Risk Premium is Required Rate of Return Expected growth rate in FCFE Actual Market Value FCFEo = Net Cash Flows from Operations - Net long-term capital investment activity + Net long-term borrowings. We need to rewrite the FCFE model to "fit" out data. FCFE=NormalizedNetIncome((WC)(1Debtratio)-(capitalexpenditurespershare-depreciationpershare)*(1-DebtRatio)wherenormalizednetincome=BookValueofEquity*ROE **All yellow cells must contain a number Intrinsic value per share Template for Problems \#3 and \#4 Normalized Net Income Capital Expenditures Depreciation Working Capital Expected Growth Rate in FCFE (WC*g)*(1-debt ratio) (NetCapitalexpenditure)*(1-debt ratio) FCFE 0 FCFE 1 Capitalization Rate Aggregate Dollar intrinsic value Intrinsic value per share Acutal Market Price Over or Under Valued Stock This is problem \#4. a. Intrinsic Value of Terrific Telephone stock is approximately =$416.60 Based upon the market value of $423.00, Terrific Telephone is over Valued. d. B Intrinsic Value of Terrific Telephone stock is approximately =$516.60 Based upon the market value of $423.00, Terrific Telephone is Over Valued. b. Intrinsic Value of Terrific Telephone stock is approximately =$641.60 Based upon the market value of $423.00, Terrific Telephone is Under Valued. C. (D) Intrinsic Value of Terrific Telephone stock is approximately =$164.60 Based upon the market value of $423.00, Terrific Telephone is Over Valued