Question
Problems: Use the following information to answer the question(s) below. Company Ticker Price per Share Earnings per Share Book Value per Share Abbott Labs ABT
Problems:
Use the following information to answer the question(s) below.
Company | Ticker | Price per Share | Earnings per Share | Book Value per Share |
Abbott Labs | ABT | 54.35 | 3.69 | 13.79 |
Bristol-Myers-Squibb | BMY | 25.45 | 1.93 | 7.33 |
GlaxoSmithKline | GSK | 41.3 | 3.15 | 6.03 |
Johnson & Johnson | JNJ | 62.6 | 4.58 | 18.27 |
Merck | MRK | 36.25 | 3.81 | 10.86 |
Pfizer | PFE | $18.30 | $1.20 | 8.19 |
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years:
year | 1 | 2 | 3 | 4 | 5 |
FCF( $ millions) | 53 | 68 | 78 | 75 | 82 |
After then, the free cash flows are expected to grow at the industry average of 4% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14%:
a. Estimate the enterprise value of Heavy Metal.
b. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimate its share price.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started