Question
Majong Inc. forecasts that it will have the free cash flows shown below. The free cash flows are expected to grow by 4% per year
Majong Inc. forecasts that it will have the free cash flows shown below. The free cash flows are expected to grow by 4% per year after year 3.
| Year | 1 | 2 | 3 |
| FCF ($ million) | -20 | 48 | 54 |
The weighted average cost of capital is 8%. The firm has $60 million of debt and 10 million shares outstanding.
What is Majong's terminal value (in $ million)?
What is the firm value today (in $ million)?
What is a good estimate of Majong's price per share?
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Financial statements
Authors: Stephen Barrad
5th Edition
978-007802531, 9780324186383, 032418638X
