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Heavy Metal Corporation is expected to generate the following free cash flows over the next five years:(Click on the following icon in order to copy
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years:(Click on the following icon
in order to copy its contents into a spreadsheet.)
Year | 1 | 2 | 3 | 4 | 5 |
FCF ($ million) | 53.0 | 68.0 | 78.0 | 75.0 | 82.0 |
After that, the free cash flows are expected to grow at the industry average of
4.0%
per year. Using the discounted free cash flow model and a weighted average cost of capital of
14.0%:
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?
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