please help solve all parts! thanks!
As of March 27, 2023, Waste Management (stock ticker: WM)'s stock price is $154.42 per share. Waste Management, Inc. (WM) 154.420.04(0.03%) is of 03.07pm tor Maret open. s. and and To assess whether the stock is over/undervalued, we aim to estimate the share price using Discounted Free Cash Flow approach. Following is Waste Management's sales forecast for the next five years along with the current year of 2023 . In addition, based on the company's past profitability and investment needs, we assume the followings: - EBIT is 15.8% of sales. - Tax rate is 21.6% of EBIT. - Accounts Receivable is expected to be 15.1% of sales. - Accounts Payable is expected to be 16.1% of sales. - No inventory is required. - Capital expenditure is expected to be 11.5% of sales. - Depreciation is expected to be 10.6% of sales. (a) To estimate free cash flows (FCF) for years 1 through 5 , fill the following table. (a) To estimate free cash flows (FCF) for years 1 through 5 , fill the following table. (b) After year 5 (year 2028), both sales revenue and free cash flows are expected to grow at a long-run rate of 2.5% every year forever. The firm-specific discount rate is 6%. What is the enterprise value today? (c) In current balance sheet, the firm has $351 million in cash, $24,503 million in debt, and 408 million shares outstanding. What is the share price? (d) Based on your estimate in (c), do you conclude that the current market price of $154.42 is fair? Or, is the stock over/undervalued? (c) Suppose that the long-run growth rate in part (b) is 3% rather than 2.5% per year. With this growth rate, how much would a share be worth? (Other than the growth rate, there is no change in the discount rate and balance-sheet items). As of March 27, 2023, Waste Management (stock ticker: WM)'s stock price is $154.42 per share. Waste Management, Inc. (WM) 154.420.04(0.03%) is of 03.07pm tor Maret open. s. and and To assess whether the stock is over/undervalued, we aim to estimate the share price using Discounted Free Cash Flow approach. Following is Waste Management's sales forecast for the next five years along with the current year of 2023 . In addition, based on the company's past profitability and investment needs, we assume the followings: - EBIT is 15.8% of sales. - Tax rate is 21.6% of EBIT. - Accounts Receivable is expected to be 15.1% of sales. - Accounts Payable is expected to be 16.1% of sales. - No inventory is required. - Capital expenditure is expected to be 11.5% of sales. - Depreciation is expected to be 10.6% of sales. (a) To estimate free cash flows (FCF) for years 1 through 5 , fill the following table. (a) To estimate free cash flows (FCF) for years 1 through 5 , fill the following table. (b) After year 5 (year 2028), both sales revenue and free cash flows are expected to grow at a long-run rate of 2.5% every year forever. The firm-specific discount rate is 6%. What is the enterprise value today? (c) In current balance sheet, the firm has $351 million in cash, $24,503 million in debt, and 408 million shares outstanding. What is the share price? (d) Based on your estimate in (c), do you conclude that the current market price of $154.42 is fair? Or, is the stock over/undervalued? (c) Suppose that the long-run growth rate in part (b) is 3% rather than 2.5% per year. With this growth rate, how much would a share be worth? (Other than the growth rate, there is no change in the discount rate and balance-sheet items)
