Question
The Wayne Corporation sold its shares to the general public in 2003. The firms estimated free cash flows for the next four years are as
The Wayne Corporation sold its shares to the general public in 2003. The firms estimated free cash flows for the next four years are as follows:
| Years | 1 | 2 | 3 | 4 | |
| Sales | 34.500,00 | 37.950,00 | 41.745,00 | 41.745,00 | |
| Operating Income | 5.865,00 | 6.451,50 | 7.096,65 | 7.096,65 | |
| Less Cash Tax Payment | - 1.642,20 | - 1.806,42 | - 1.987,06 | - 1.987,06 | |
| NOPAT | 4.222,80 | 4.645,08 | 5.109,59 | 5.109,59 | |
| Less Investment | |||||
| Investment in net working capital | - 407,73 | - 448,50 | - 493,35 | - | |
| CAPEX | - 564,55 | - 621,00 | - 683,10 | - | |
| Total Investment | - 972,28 | - 1.069,50 | - 1.176,45 | - | |
| Free Cash Flow | 3.250,52 | 3,575,58 | 3,933,14 | 5,109,59 |
Wayne estimated that its free cash flow would form a level perpetuity beginning in year 4. Furthermore, the firms investment banker did a study of the firms cost of capital and estimated the weighted average cost of capital to be approximately 15 percent. a. What is the value of Wayne Corporation? b. Given that Waynes invested capital in year 0 is USD 11,290.91, what is the market value added for Wayne? c. If Wayne has 4,000 shares of common stock outstanding and liabilities valued at USD 6,000, what is the value per share of its stock?
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International Finance
Authors: Keith Pilbeam
5th Edition
1350347094, 978-1350347090
