Consider the following financial information about ABC Limited: High Growth Stage (2 years) Stable growth Stage...

 

Transcribed Image Text:

Consider the following financial information about ABC Limited: High Growth Stage (2 years) Stable growth Stage Growth rate of FCFF = 15% Growth rate of FCFF = 3% EBIT (1-T) = $200 WACC = 10% Capital Expenditures = $100 Depreciation = $100 Increase in NCWC = $120 Market value of debt Cash = $1,450 Number of shares = 28 = $2,500 Using the information above in a two-stage discounted cash flow (DCF) model, calculate the target price of ABC Limited (in $ per share). Consider the following financial information about ABC Limited: High Growth Stage (2 years) Stable growth Stage Growth rate of FCFF = 15% Growth rate of FCFF = 3% EBIT (1-T) = $200 WACC = 10% Capital Expenditures = $100 Depreciation = $100 Increase in NCWC = $120 Market value of debt Cash = $1,450 Number of shares = 28 = $2,500 Using the information above in a two-stage discounted cash flow (DCF) model, calculate the target price of ABC Limited (in $ per share).

Answer rating: 100% (QA)

In a twostage DCF model we first need to estimate the free cash flows to firm FCFF in both the highgrowth and stablegrowth phases Then we discount the... View the full answer