PART: 1

The following are the free cash flows (FCFs) during the next 3 years for Channel 7 which is a media company. The FCF are expected to grow at a constant 9% rate after 3 years. Channel 7's weighted average cost of capital WACC is 13%. Free cash flow ($ millions) are as follows: Year 1 = -$42, Year 2 = $76 and Year 3 = $94. Based on this information find out:a) What is Channel 7's terminal, or horizon, value? b) What is the current value of operations for Channel 7?c) Suppose Channel 7 has $15 million in marketable securities, $114 million in debt, and 16 million shares of stock. What is the intrinsic price per share?

PART: 2

Pure Dairies Inc. currently holds $385,000 of non-operating marketable securities. Its long-term debt is $1,600,000, but it has never issued preferred stock. Pure Dairies has 72,000 shares of stock outstanding. Its current free cash flow is $178,000, and this FCF is expected to grow at a constant 11% rate. Pure Dairies has never paid a dividend, and it's not known when the firm might begin paying dividends. The weighted average cost of capital WACC is 13%. (a) Calculate Pure Dairies' value of operations. (b) Calculate the company's total value. (c) Calculate the intrinsic value of its common equity. (d) Calculate the intrinsic per share stock price.