Question
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Year 1 2 3 4 5 FCF ($millions)
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years:
Year | 1 | 2 | 3 | 4 | 5 |
FCF ($millions) | 53 | 68 | 78 | 75 | 82 |
After then, the free cash flows are expected to grow at the industry average of 4% per year (continuation value). Using the discounted free cash flow model and a weighted average cost of capital of 14%, estimate the approximate share price for Heavy Metal if the firm has $50 million in excess cash, financial debt (short and long term) of $150 million, and 40 million shares outstanding. (Hint: Find the Enterprise Value).
A. $9.5
B. $11.5
C. $13.0
D. $15.5
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