You are valuing ChickenCousins, a chain of fast food restaurants focusing on processed chicken dishes. You assume the following forecasts of items in the free
You are valuing ChickenCousins, a chain of fast food restaurants focusing on processed chicken dishes. You assume the following forecasts of items in the free cash flows of ChickenCousins:
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| EBIT | 40 | 50 | 60 |
| Depreciation | 4 | 5 | 6 |
| Capital expenditure | 6 | 7 | 8 |
| Change in net working capital | 2 | 3 | 4 |
The firm's tax rate is 40% and its WACC is 10%. The company has debt worth 100. Calculate the free cash flows, and assume they will grow by 3% per year after Year 3. What is the value of the value of ChickenCousins' equity? Enter your answer as an integer. For example, if you find the value to be 123.4, enter 123.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate the free cash flows FCF for each year we can use the following formula FCF EBIT 1 Tax r...
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Step: 2
Step: 3
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Authors: Eugene F. Brigham and Michael C. Ehrhardt
13th edition
1439078106, 111197375X, 9781439078105, 9781111973759, 978-1439078099
