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FIN - Derby Corporation Problem

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solution


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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;4Free cash flow;-$20.0;$20.0;$80.0;$84.0Marketable 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).;Current;Projected;0;1;2;3;4Free cash flow;-$20.0;$20.0;$80.0;$84.0Long-term constant growth in FCF;Horizon value;b. Calculate the present value of the horizon value, the present value of the free cash flows, and the estimated Year-0 value of operations.;PV of horizon value;PV of FCF;Value of operations (PV of FCF + HV);c. Calculate the estimated Year-0 price per share of common equity.;Value of operations;Plus value of narketable securities;Total value of company;Less value of debt;Less value of preferred stock;Estimated value of common equity;Divided by number of shares;Price per share

 

Paper#50533 | Written in 18-Jul-2015

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