Forta Manufacturing just reported Free Cash Flow (FCF) of $60 million, which is expected to grow at 4% indefinitely. The company has 20,000,000 shares of common stock outstanding, $275 million in debt, and $35 million in preferred stock outstanding. Forta has a WACC of 12% and excess cash of $25 million.

a. What is the value of Forta’s operations?
b. What is the intrinsic value (per share) of Forta’s common stock?
c.  Suppose Forta uses its excess cash to repurchase shares. How many shares will be repurchased?
d.  What is the intrinsic value (per share) of Forta’s common stock after the share repurchase?

Answer rating: 100% (QA)

a value of operations FCF x 1growthWACCgrowth 60 x 14 12 4 780 mi... View the full answer