Company ABC has the following free cash flows to the firm (FCFF) forecast for the next...

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• Company ABC has the following free cash flows to the firm (FCFF) forecast for the next 5 years: Year FCFF (in millions) Year 1 1.0 Year 2 1.2 Year 3 1.4 (All values below are in millions) Cash Debt value Shares outstanding Year 4 Year 5 1.0 0.8 ABC weighted average cost of capital (WACC) is 7%, and year 6+ will be FCFF of 1.1 growing at 2% in perpetuity. • What is the present value of the FCFF? Year 6+ 1.1 Question 2 Part 2 • Using the FCFF calculated in Part 1, use the below to determine the total firm value, the equity value, and the stock price? 5 8.5 20 • Ignore Parts 1 and 2, instead of forecasting future cash flows, ABC (Alaskan Bagel Company) decides to use comparable firms in their industry to value their company. They determined the following average multiples based on averaging 5 comparable companies, averages are given in last row of table: EV/EBITDA Comparable Firms Sandwich Warehouse Under Wraps Bagel Cart Croissant Central Grilled Cheese Factory Average 5.2x 4.8x 4.5x 6.0x 5.7x 5.24x P/E 23x 25x 32x 30x 26x 27.2x • ABC has EBITDA of 70 million, cash of 15 million, debt of 90 million, net income of 10 million, and 1 million shares outstanding. • What is the price per share using the EV/EBITDA multiple and the total value of equity using the P/E multiple? • Company ABC has the following free cash flows to the firm (FCFF) forecast for the next 5 years: Year FCFF (in millions) Year 1 1.0 Year 2 1.2 Year 3 1.4 (All values below are in millions) Cash Debt value Shares outstanding Year 4 Year 5 1.0 0.8 ABC weighted average cost of capital (WACC) is 7%, and year 6+ will be FCFF of 1.1 growing at 2% in perpetuity. • What is the present value of the FCFF? Year 6+ 1.1 Question 2 Part 2 • Using the FCFF calculated in Part 1, use the below to determine the total firm value, the equity value, and the stock price? 5 8.5 20 • Ignore Parts 1 and 2, instead of forecasting future cash flows, ABC (Alaskan Bagel Company) decides to use comparable firms in their industry to value their company. They determined the following average multiples based on averaging 5 comparable companies, averages are given in last row of table: EV/EBITDA Comparable Firms Sandwich Warehouse Under Wraps Bagel Cart Croissant Central Grilled Cheese Factory Average 5.2x 4.8x 4.5x 6.0x 5.7x 5.24x P/E 23x 25x 32x 30x 26x 27.2x • ABC has EBITDA of 70 million, cash of 15 million, debt of 90 million, net income of 10 million, and 1 million shares outstanding. • What is the price per share using the EV/EBITDA multiple and the total value of equity using the P/E multiple?

Answer rating: 100% (QA)

Solution Here are the calculations for the questions Part 1 FCFF Year 1 12M FCFF Year 2 11M FCFF Yea... View the full answer