Question
You are valuing Soda City Inc. It has $111 million of debt, $86 million of cash, and 161 million shares outstanding. You estimate its cost
You are valuing Soda City Inc. It has $111 million of debt, $86 million of cash, and 161 million shares outstanding. You estimate its cost of capital is 11.9%. You forecast that it will generate revenues of $709 million and $791 million over the next two years. Projected operating profit margin is 24%, tax rate is 28%, reinvestment rate is 29%, and terminal exit value multiple at the end of year 2 is 14. What is your estimate of its share price? Round to one decimal place. [Hint: Compute projected FCFF for years 1 and 2 based on info provided, compute terminal value using the exit multiple method, discount it all to find EV, walk the bridge to Equity, divide by number of shares outstanding.]
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