Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Thereafter, the free cash flows are expected to
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Thereafter, the free cash flows are expected to grow at the industry average of 3.6% per year. Using the discounted free cash flow model and a weighted average cost of capital of 13.3% : a. Estimate the enterprise value of Heavy Metal. b. If Heavy Metal has no excess cash, debt of $302 million, and 40 million shares outstanding, estimate its share price. a. Estimate the enterprise value of Heavy Metal. The enterprise value will be $ million. (Round to two decimal places.) To determine the stock price per share, use the following formula: P0=SharesOutstandingV0+Cash0Debt0 V0=n=15(1+rWACC)nFCFn+(1+rWACC)51rWACCgFCFFCF5(1+gFCF) Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Thereafter, the free cash flows are expected to grow at the industry average of 3.6% per year. Using the discounted free cash flow model and a weighted average cost of capital of 13.3% : a. Estimate the enterprise value of Heavy Metal. b. If Heavy Metal has no excess cash, debt of $302 million, and 40 million shares outstanding, estimate its share price. a. Estimate the enterprise value of Heavy Metal. The enterprise value will be $ million. (Round to two decimal places.) To determine the stock price per share, use the following formula: P0=SharesOutstandingV0+Cash0Debt0 V0=n=15(1+rWACC)nFCFn+(1+rWACC)51rWACCgFCFFCF5(1+gFCF)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started