Problem 8-10 You are building a free cash flow to the firm model. You expect sales to grow from $1.2 billion for the year that just ended to $1.38 billion five years from now. Assume that the company will not become any more or less efficient in the future. Assume that the company will grow at a constant rate for 5 years, and then at a constant rate of 2.334672% for year 6 and onward after that. Use the following information to calculate the value of the equity on a per-share basis. a. Assume that the company currently has $324 million of net PP&E. b. The company currently has $108 million of net working capital. c. The company has operating margins of 12 percent and has an effective tax rate of 31 percent. d. The company has a weighted average cost of capital of 11 percent. This is based on a capital structure of two-thirds equity and one-third debt. e. The firm has 1 million shares outstanding. Do not round intermediate calculations. Round your answer to the nearest cent. $
Problem 8-10 You are building a free cash flow to the firm model. You expect sales to grow from $1.2 billion for the year that just ended to $1.38 billion five years from now. Assume that the company will not become any more or less efficient in the future. Assume that the company will grow at a constant rate for 5 years, and then at a constant rate of 2.334672% for year 6 and onward after that. Use the following information to calculate the value of the equity on a per-share basis. a. Assume that the company currently has $324 million of net PP&E. b. The company currently has $108 million of net working capital. c. The company has operating margins of 12 percent and has an effective tax rate of 31 percent. d. The company has a weighted average cost of capital of 11 percent. This is based on a capital structure of two-thirds equity and one-third debt. e. The firm has 1 million shares outstanding. Do not round intermediate calculations. Round your answer to the nearest cent. $
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 18P: Free Cash Flow Valuation
Dozier Corporation is a fast-growing supplier of office products. Analysts...
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![Problem 8-10
You are building a free cash flow to the firm model. You expect sales to grow from $1.2 billion for the
year that just ended to $1.38 billion five years from now. Assume that the company will not become any
more or less efficient in the future. Assume that the company will grow at a constant rate for 5 years,
and then at a constant rate of 2.334672% for year 6 and onward after that. Use the following
information to calculate the value of the equity on a per-share basis.
a. Assume that the company currently has $324 million of net PP&E.
b. The company currently has $108 million of net working capital.
c. The company has operating margins of 12 percent and has an effective tax rate of 31 percent.
d. The company has a weighted average cost of capital of 11 percent. This is based on a capital
structure of two-thirds equity and one-third debt.
e. The firm has 1 million shares outstanding.
Do not round intermediate calculations. Round your answer to the nearest cent.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fea3e2d6f-a9e9-48f4-a586-0f7559112f8c%2F2b754b06-38dc-4c37-83d5-c12e6684f33d%2Foxoeboj_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 8-10
You are building a free cash flow to the firm model. You expect sales to grow from $1.2 billion for the
year that just ended to $1.38 billion five years from now. Assume that the company will not become any
more or less efficient in the future. Assume that the company will grow at a constant rate for 5 years,
and then at a constant rate of 2.334672% for year 6 and onward after that. Use the following
information to calculate the value of the equity on a per-share basis.
a. Assume that the company currently has $324 million of net PP&E.
b. The company currently has $108 million of net working capital.
c. The company has operating margins of 12 percent and has an effective tax rate of 31 percent.
d. The company has a weighted average cost of capital of 11 percent. This is based on a capital
structure of two-thirds equity and one-third debt.
e. The firm has 1 million shares outstanding.
Do not round intermediate calculations. Round your answer to the nearest cent.
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