Question: NEED ANSWER ASAP / ANSWER NEVER USED BEFORE Your employer, a mid-sized human resources management firm, is considering expanding into related fields, including the acquisition

NEED ANSWER ASAP / ANSWER NEVER USED BEFORE

Your employer, a mid-sized human resources management firm, is considering expanding into related fields, including the acquisition of Temp Force Company, an employment agency that provides word processor operators and computer programmers to businesses with a high temp workload. Your employer is also considering buying Biggerstaff & McDonald (B&M), a privately held company owned by two friends who each own 5 million shares. B&M currently has $24 million in free cash flow, which is expected to grow at a constant 5% growth rate. B&M's financial statements report $100 million in short-term investments, $200 million in debt, and $50 million in preferred stock. B&M has a weighted average cost of capital (WACC) of 11%. Answer the following questions: a. Briefly describe the legal rights and privileges of common stockholders. b. What is Free Cash Flow (FCF)? What is weighted average cost of capital? What is a Free Cash Flow Valuation Model? d. Assume that free cash flow at time 1 is expected to grow at a constant rate of gL forever. If gL is less than WACC, what is the formula for the present value of the expected free cash flow when discounted at WACC? If the most recent free cash flow is expected to grow at a constant rate of gL forever (and gL is less than WACC), then when discounted as WACC? e. Use B&M's data and the free cash flow valuation model to answer the following questions: (1) What is the estimated value of its operations? (2) What is its estimated total enterprise value? (This is the entity value.) (3) What is its estimated intrinsic value of the equity? (4) What is its estimated intrinsic price per share?

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