Question
The BC security analyst group needs to make investment recommendation as of September 31, 2012 for Best Buy to its clients. To estimate a fundamental
The BC security analyst group needs to make investment recommendation as of September 31, 2012 for Best Buy to its clients. To estimate a fundamental value of the company, the group has decided to use a DCF method using a cost of capital of 10.21%. On September 31,2020, the number of shares outstanding is $ 336.7 million and the price per share is $ 25.20. The cash flow projections for the next five year is summarized in the below table.
Period Ending March 31 (Unit: $ Million) | 2013 E | 2014 E | 2015 E | 2016 E | 2017 E |
EBIT | 1,502.4 | 1,319.6 | 1,236.3 | 1,157.3 | 1,144.9 |
Depreciation & Amortization | 951.7 | 989.3 | 1,026.4 | 1,060.1 | 1,094.7 |
Deferred Taxes | (30.0) | (134.0) | 28.0 | (30.0) | (134.0) |
Others | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Changes in Working Capital | (296.5) | 35.9 | 26.3 | 25.8 | (12.6) |
Capital Expenditures | (749.5) | (770.5) | (760.0) | (693.) | (683.3) |
Taxes | (508.7) | (446.8) | (418.6) | (391.9) | (387.7) |
Total Unlevered Free Cash Flows | 869.4 | 993.5 | 1,138.3 | 1,128.3 | 1,022.0 |
1. The PV of for the next five years is____ . (Round to the nearest tenth.)
2. When the company's EV/EBITDA multiple is 5.3, the terminal value (i.e., EV) in year 5 using the multiple method would be _____ and the present value of the terminal value would be _________. (Round to the nearest tenth.)
3. The estimated enterprise value (EV) of Best Buy is and the equity value is when the amount of Net Debt, Non-controlling interests, and preferred securities is $ 1,546.0 MM. (Round to the nearest tenth.)
4. The fundamental stock price per share would be ____ (Round to the nearest tenth.)
5. Based on the above value, the analyst group can make a recommendation (i.e., buy or sell) because the current stock of BEST BUY is _____ (i.e., overvalued or undervalued.).
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