Quantitative Problem 1: Assume today is December 31, 2019. Barrington Industries expects that its 2020 after-tax operating Income (EBIT(1-1)] will be $400 million and its 2020 depreciation expense will be $60 million. Barrington's 2020 gross capital expenditures are expected to be $100 million and the change in its net operating working capital for 2020 will be $25 million. The firm's free cash flow is expected to grow at constant rate of 5.5% annually. Assume that its free cash flow occurs at the end of each year. The firm's weighted average cost of capital is 8.9%; the market value of the company's debt is $275 billion and the company has 180 million shares of common stock outstanding. The firm has no preferred stock on its balance sheet and has no plans to use it for future capital budgeting projects: Also, the firm has zero non-operating assets. Using the corporate valuation model what should be the company's stock price today (December 31, 2019) Do not round Intermediate calculations. Round your answer to the nearest cent Der share Quantitative Problem 1: Assume today is December 31, 2019. Barrington Industries expects that its 2020 after-tax operating Income (EBIT(1-1)] will be $400 million and its 2020 depreciation expense will be $60 million. Barrington's 2020 gross capital expenditures are expected to be $100 million and the change in its net operating working capital for 2020 will be $25 million. The firm's free cash flow is expected to grow at constant rate of 5.5% annually. Assume that its free cash flow occurs at the end of each year. The firm's weighted average cost of capital is 8.9%; the market value of the company's debt is $275 billion and the company has 180 million shares of common stock outstanding. The firm has no preferred stock on its balance sheet and has no plans to use it for future capital budgeting projects: Also, the firm has zero non-operating assets. Using the corporate valuation model what should be the company's stock price today (December 31, 2019) Do not round Intermediate calculations. Round your answer to the nearest cent Der share Quantitative Problem 2: Hadley Inc. forecasts the year-end free cash flows (in millions) shown below Year 4 S FCF - $22.48 $38.2 $43.4 $529 $55.1 The weighted average cost of capital is 9%, and the FCE are expected to continue growing at a 49 rate after year 5. The firm has $26 million of market value debt, but it has no preferred stock or any other outstanding daim. There are 20 million shares outstanding. Also, the firm has zero non-operating assets. What is the value of the stock price today (Year Round your answer to the nearest cent Do not found intermediate calculations. per share According to the valuation models developed in this chapter the value that an investorsions to a share of stock is dependent on the length of time the investor plans to hold the stock The statement above is the Conclusions Analysts use both the discounted dividend model and the corporate valuation model when valuing mature dividend paying firms and they generally in the corporate model when valuing division and in that do not pay dividend in inciple should find the same intric valve singelther model but differences are often observed Even if a company is paving steady dividende, much can be learned from the corporate model analysts today in it for all types of valuation. The process of projecting future financial statements can wat great deal about a company operations and needs. Also, toch analysis can provide alones into actions that might be take to the conna valuta for this inter to the planning and forecasting process
