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This is the whole question!!!!!!!!!! Selected data for the Derby Corporation are shown below. Use the data to answer the following questions. INPUTS (In millions)
This is the whole question!!!!!!!!!!
| 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 operations at the end of the forecast period immediately after the Year-4 free cash flow). Assume growth becomes constant after Year 3. | |||||||
| Current | Projected | ||||||
| 0 | 1 | 2 | 3 | 4 | |||
| Free cash flow | -$20.0 | $20.0 | $80.0 | $84.0 | |||
| Long-term constant growth in FCF | |||||||
| Horizon value | |||||||
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