Options: Blank 1 - historical, market, intrinsic

Blank 2 - entity, excess, economic

Blank 3 - assets, liabilities, equity

Blank 4 - dividing, compunding, discounting

Blank 5 - short-term, long-term

Several methods can be used to compute the intrinsic value of a share of a company's common stock. One method uses the free cash flow (FCF) valuation model, while the another method uses the dividend discount model value-as the sum of The FCF valuation model computes a firm's the value of its operating activities (Vop) and the value of firm's nonoperating value-also called its here: Vop is computed by cost of capital A firm's nonoperating assets include its highly marketable invests its temporaily available excess cash, and its investments in other businesses. the firm's expected future free cash flows by its weighted average securities in which a firmm Which of the following statements about the FCF valuation model are true? The FCF valuation model recognizes that a firm's value is a function of its risk-including its use of debt and equity financing and the markets in which it operates A company's FCFs are a function of how efficiently and effectively the firm's managers use the company's operating assets and, in turn, the profitability of the company's primary business activities The model is useful because it provides its decision-makers with insights into the quality of their decision-making, as measured by the intrinsic value of their company The model can only be used to value companies-but not their component divisions or other smaller operating units Consider the case of Merry Meerkat Marketing: Next year, Merry Meerkat is expected to earn an EBIT of $16,000,000, and to pay a federal-plus-state tax rate of 35%. It also expects to make 4,000,000 in new capital expenditures to support this level of business activity, as well as 50,000 in additional net operating working capital (NOWC) Given these expectations, it is reasonable to conclude that next year Merry Meerkat will generate an annual free cash flow (FCF) of (rounded to the nearest whole dollar) Next, based on your estimate of Merry Meerkat's next year's FCF and making the stated assumptions, complete the following table: Merry Meerkat can sustain this annual FCF forever, Attributes of Merry Meerkat Value the company has a weighted average cost of capital of 16.02% Total Entity Value Value of Common Equity Intrinsic value (per share) . the company does not currently own any marketable securities, and there are 75,000 shares of Merry Meerkat outstanding