Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Is the company under or overpriced? If you were an analyst working for an investment bank, would you recommend investors to buy/hold or sell the

image text in transcribedimage text in transcribedimage text in transcribed

Is the company under or overpriced?

If you were an analyst working for an investment bank, would you recommend investors to buy/hold or sell the stock? Reason your answer

( company = lululemon) if you was curious

\begin{tabular}{llccccc} Discount Period & 1 & 2 & 3 & 4 & 5 \\ WACC & 9.5% & 9.5% & 9.5% & 9.5% & 9.5% \\ PVLS Factor & 0.91 & 0.83 & 0.76 & 0.70 & 0.64 \\ Present Value of Free Cash Flow & 969 & 1,018 & 1,069 & 1,123 & 1,180 \\ \hline \end{tabular} \begin{tabular}{|lr|} \hline \multicolumn{2}{|c|}{ Terminal (Continuing) Value } \\ \hline Exit Year FCF & 1,856 \\ Long Term Normal Growth Rate & 4.0% \\ Short Term Growth Rate & 15.0% \\ Terminal Value & 38,896 \\ Discount Factor & 0.64 \\ Implied EV/EBITDA & 12.4 \\ \hline \end{tabular} \begin{tabular}{|lr|} \hline Enterprise Value: & \\ \hline Cumulative Present Value of UFCF & 5,360 \\ Present Value of Terminal Value & 24,721 \\ \% of Enterprise Value & 82.2% \\ & \\ Enterprise Value & 30,081 \\ \hline \end{tabular} \begin{tabular}{llccccc} Discount Period & 1 & 2 & 3 & 4 & 5 \\ WACC & 9.5% & 9.5% & 9.5% & 9.5% & 9.5% \\ PVLS Factor & 0.91 & 0.83 & 0.76 & 0.70 & 0.64 \\ Present Value of Free Cash Flow & 969 & 1,018 & 1,069 & 1,123 & 1,180 \\ \hline \end{tabular} \begin{tabular}{|lr|} \hline \multicolumn{2}{|c|}{ Terminal (Continuing) Value } \\ \hline Exit Year FCF & 1,856 \\ Long Term Normal Growth Rate & 4.0% \\ Short Term Growth Rate & 15.0% \\ Terminal Value & 38,896 \\ Discount Factor & 0.64 \\ Implied EV/EBITDA & 12.4 \\ \hline \end{tabular} \begin{tabular}{|lr|} \hline Enterprise Value: & \\ \hline Cumulative Present Value of UFCF & 5,360 \\ Present Value of Terminal Value & 24,721 \\ \% of Enterprise Value & 82.2% \\ & \\ Enterprise Value & 30,081 \\ \hline \end{tabular}

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

International Trade Finance

Authors: Indian Institute Of Banking & Finance

1st Edition

9386394723, 978-9386394729

More Books

Students also viewed these Finance questions