Question
Start with the partial model in the file Ch08 P22 Build a Model.xlsx on the textbook's web site. selected data for the derby corporation are
Start with the partial model in the file Ch08 P22 Build a Model.xlsx on the textbook's web site. selected data for the derby corporation are shown below. Use the Data to answer the following questions.
INPUTS (In Millions) | Year | ||||
Current | Projected | ||||
0 | 1 | 2 | 3 | 4 | |
Free cash flow | -$20.0 | $20.0 | $80.0 | $84.0 | |
Marketable securities | $40 | ||||
Notes payable | $100 | ||||
Long-term bonds | $300 | ||||
Preferred stock | $50 | ||||
WACC | 9.00% | ||||
Number of shares of stock | 40 |
a. Calculate the estimated horizon value (i.e., the value of the operations at the end of the forecast period immediately after the Year-4 free cash flow).
b. Calculate the present value of the horizon value, the present value of the free cash flows, and the estimated Year-0 value of operations.
c. Caclulate the estimated Year-0 price per share of common equity.
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