Question
You are valuing Soda City Inc. It has $136 million of debt, $76 million of cash, and 186 million shares outstanding. You estimate its cost
You are valuing Soda City Inc. It has $136 million of debt, $76 million of cash, and 186 million shares outstanding. You estimate its cost of capital is 9.4%. You forecast that it will generate revenues of $729 million and $771 million over the next two years. Projected operating profit margin is 34%, tax rate is 23%, reinvestment rate is 49%, and terminal exit value multiple at the end of year 2 is 10. 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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