3 INPUTS (In millions) 4 5 6 Free cash flow 7 Marketable securities 8 Notes payable...

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3 INPUTS (In millions) 4 5 6 Free cash flow 7 Marketable securities 8 Notes payable 9 Long-term bonds 10 Preferred stock 11 WACC 12 Number of shares of stock 13 B Current 0 $50 $140 $560 $70 12.00% 50 million 1 million million million -$25.0 million million million million million million million #N/A #N/A #N/A D Year #N/A #N/A #N/A #N/A #N/A #N/A 2 14 a. Calculating the estimated horizon value (i.e., the value of operations at the end of the forecast 15 period immediately after the Year-4 free cash flow) Formulas #N/A #N/A #N/A #N/A Projected 16 Constant long-term growth rate 17 Horizon value at Year 4 18 19 b. Calculating the present value of the horizon value, the present value of the free cash flows, 20 and the estimated Year-O value of operations 21 Present value of HV 22 Present value of FCF 23 Value of operations 24 25 c. Calculating the estimated Year-0 price per share of common equity 26 Value of operations 27 + Value of marketable securities 28 Total intrinsic value 29 Value of total debt 30 Value of preferred stock 31 Intrinsic value of equity 32 Number of shares 33 Intrinsic stock price 34 $25.0 E 3 $110.0 F 4 $117.7 3 INPUTS (In millions) 4 5 6 Free cash flow 7 Marketable securities 8 Notes payable 9 Long-term bonds 10 Preferred stock 11 WACC 12 Number of shares of stock 13 B Current 0 $50 $140 $560 $70 12.00% 50 million 1 million million million -$25.0 million million million million million million million #N/A #N/A #N/A D Year #N/A #N/A #N/A #N/A #N/A #N/A 2 14 a. Calculating the estimated horizon value (i.e., the value of operations at the end of the forecast 15 period immediately after the Year-4 free cash flow) Formulas #N/A #N/A #N/A #N/A Projected 16 Constant long-term growth rate 17 Horizon value at Year 4 18 19 b. Calculating the present value of the horizon value, the present value of the free cash flows, 20 and the estimated Year-O value of operations 21 Present value of HV 22 Present value of FCF 23 Value of operations 24 25 c. Calculating the estimated Year-0 price per share of common equity 26 Value of operations 27 + Value of marketable securities 28 Total intrinsic value 29 Value of total debt 30 Value of preferred stock 31 Intrinsic value of equity 32 Number of shares 33 Intrinsic stock price 34 $25.0 E 3 $110.0 F 4 $117.7

Answer rating: 100% (QA)

Answer To solve the problem we need to follow these steps a Calculate the estimated horizon value HV which is the value of operations at the end of th... View the full answer