As a financial analyst, you need to estimate the stock price of a private company, Bauer Corp.,
Question:
- As a financial analyst, you need to estimate the stock price of a private company, Bauer Corp., using the DCF model. Assume that it is the end of 2018. You are given the income statement and balance sheet for 2018 as well as projections for the next five years. (Your forecast period is 5 years). You already calculated FCFs from 2020 to 2023.
2019 (or Year 1) | 2020 (or Year 2) | 2021 (or Year 3) | 2022 (or Year 4) | 2023 (or Year 5) | |
FCF | ?? | $121 | $0 | $131.77 | $160 |
You need to calculate the FCF for 2019 and complete the OCF analysis. The relevant information for the analysis is provided here:
Income Statement | ||
2018 | 2019 | |
Sales | 3500 | 4200 |
Cost of goods sold | 2200 | 2620 |
SG&A expense | 710 | 740 |
Depreciation | 110 | 120 |
Interest expense | 25 | 70 |
Interest income | 5 | 10 |
Balance Sheet | ||
2018 | 2019 | |
Assets | ||
Cash and equivalents | 5 | 15 |
Marketable securities | 70 | 90 |
Accounts receivable | 1330 | 1290 |
Inventories | 560 | 707 |
Net property and equipment | 11700 | 12100 |
2018 | 2019 | |
Liabilities | ||
Accounts Payable | 40 | 120 |
Accrued expenses | 115 | 145 |
Short Term financing | 122 | 89 |
The Corporate tax rate is 25%
After 2023, you expect that the FCF grows at 2% in perpetuity
The appropriate discount rate is 10%
The market value of the firm's total debt is $400
There are 90 shares outstanding.
2. What is EBIT in 2019? What is NOPLAT in 2019?
3. What is CAPEX in 2019?
4. What is NWC in 2018? What is NWC in 2019?
5. What is the FCF in 2019?
6. What is the terminal value (i.e. the PV (as 2023) for all FCFs after 2023)?
7. What is Bauer Corp.'s enterprise value today?
8. Complete Bauer Corp.'s market value balance sheet for 2018:
Market Value Balance Sheet | |
Excess cash & non-operating assets: | Debt: |
Operating Assets: | Equity: |
Asset Value: | Debt + Equity: |
9. What is the market value of Bauer Corp.'s equity? What is the stock price per share?
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1285190907
8th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw