Problem $1$

tax rate for the firm is $21\%.$

The firm has debt outstanding trading at a market value of $$20\mathrm{.}0$ billion and yield a pre$-$tax interest rate of $8\%.$

There are $100$ million shares outstanding, trading at $$250$ per share, and the most recent beta was $1\mathrm{.}20.$ The Treasury bond rate is $3\%,$ and the market risk premium is $6\mathrm{.}5\%.$

you using the cost of debt, cost of equity and the information in the preceding two paragraphs.$)$

The firm expects revenues, earnings $($EBITDA$)$ and depreciation to grow at $10\%$ a year from $2023$ to $2026,$ after which the growth rate is expected to drop to $3\%$ a year forever.

provided as a guide to help you organize your work and get to the Free Cash Flow to the Firm$)$:

a$)$ Estimate the free cash flow to the firm for each of the following indicated years.

Capital Expenditures

Free Cash Flow to Firm

b$)$ Estimate the Enterprise Value of Lockheed $($value of the firm's operations$).$

c$)$ Lockheed has $$800$ million in cash. Estimate the Market Value of Equity and estimate the intrinsic share price of Lockheed.

e$)$ Assume that today is December $31,2023,$ and that the following information applies to Abner Airlines, a relatively mature company:

After$-$tax operating income $[$EBIT$(1-$T$)]$ for the end of year $2023$ was $$600$ million.

The depreciation expense for $2023$ was $$140$ million.

The capital expenditure for $2023$ was $$225$ million.

No change in net operating working capital

The free cash flow is expected to grow at a constant rate of $3\mathrm{.}5\%$ per year perpetually

The cost of equity is $14\%$

The weighted average cost of capital $($WACC$)$ is $10\%$

The market value of the company's debt is $$3\mathrm{.}875$ billion

$200$ million shares of stock are outstanding.

What should be the intrinsic value of the stock's price?