Question: Please solve using excel with a formula sheet You have been hired to value the stock of a privately-held chain of grocery stores, FreshCo. FreshCo

Please solve using excel with a formula sheet
 Please solve using excel with a formula sheet You have been

You have been hired to value the stock of a privately-held chain of grocery stores, FreshCo. FreshCo has 25,000 common shares outstanding. In addition to equity financing, the company is also financed with debt, which consists of one bond issue. The bond issue comprises bonds that have a face value of $1,000, mature in 5 years, and have an annual coupon rate of 7% (coupon payments are made semiannually at the end of each period). The company has a total of 1,000 bonds outstanding, and the yield-to-maturity on these bonds is 9% APR. Based on your discussions with the management, you have projected growth rates for FreshCo's free cash flows over the next 5 years. After year 5, you expect that free cash flows will grow at 3% in perpetuity. All cash flows are received at the end of the year The cash flow for the trailing twelve months has already occurred, and the next cash inflow is due one year from today The annual discount rate for the firm's free cash flows is 12%, and the tax rate is 30%. Please compute the value of FreshCo's stock using the discounted cash flow method Hint:2 Market value of debt (number of bonds outstanding)*(bond price implied by the YTM) Income statement and cash flow items for FreshCo for the trailing twelve months: 4,220,000 Estimated growth in free cash flow for FreshCo, years ear Note that the discount rate for bond payments (which you will derive from the YTM to obtain the bond price) is lower than the 12% discount rate that you will use for discounting free cash flows for the entire firm. This is true in reality because debt holders are paid before shareholders, and, therefore, debt payments are less risky, compared to the riskiness of the entire firm

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