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What growth rate must be assumed over the next ten...

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What growth rate must be assumed over the next ten years to justify the recommended offering price of $28 per share? Calculate the value per share of Netscape based on a discounted free cash flow analysis. Build your model using the Excel template provided. your forecast should cover the years 1996 to 2005 inclusive. Note that the figures entered for 1995 in this spreadsheet are taken from Exhibit 1, which reports data for the Six Months Ended June 30, 1995. In valuing Netscape, use the following assumptions: ? Cost of goods sold is constant at 10.4% of sales. ? Research and development is constant at 36.8% of sales. ? Sales, general, administrative, (SG&A) declines on a straight-line basis from 65.4% of sales in 1996 to 15.4% of sales in 2001, and remain constant thereafter. This level is consistent with Microsoft?s ratio of operating income to sales. ? Capital expenditures decline from 38.8% of sales in 1996 to 10.8% of sales by 2001, and remain constant thereafter. This level is again consistent with Microsoft?s experience. ? Depreciation is constant at 5.5% of sales. ? Changes in net working capital are zero. ? Marginal tax rate is 34%. Note that any tax-loss carry-forwards can be used to reduce taxable income in subsequent years. ? Long-term steady-state growth rate is 4.0% after 2005 ? Long-term riskless interest rate is 7.5% ? Implied credit spread on Netscape?s debt is 5.0% above the riskless rate. ? Target debt-to-capital ratio of 18% ? Historical equity risk premium is 7.0% ? Firm beta of 0.75,Thank you. And, an excel file given by our prof is attached here, hope if that helps.,Thank you.

 

Paper#11863 | Written in 18-Jul-2015

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