Heavy Metal Corporation is expected to generate the following free cash flows over the next five years:
Year 1 2 3 4 5
FCF ($ millions) 53 68 78 75 82
After then, the free cash flows are expected to grow at the industry average of 4% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14%:
a. Estimate the enterprise value of Heavy Metal.
b. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimates its share price.
Note:
1).Complete the corporate valuation problem, Free Cash Flow Valuation, in an Excel document. Show the details of your own calculation and work in your answer to the problem.
2).Please don’t copy and paste the solution from ©2011 Pearson Education, Inc. Publishing as Prentice Hall and Seminar 5 Corporate Finance Equivalence of APV, FTE, and WACC OR from any other one. You’ve to show your own work.
