Problem $10-6$

Complete the steps below using cell references to given data or previous calculations. In some

cases, a simple cell reference is all you need. To copy$/$paste a formula across a row or down a

column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel

function is to be used, the directions will specify the use of that function. Do not type in mumerical

data into a cell or function. Instead, make a reference to the cell in which the data is found. Make

your computations only in the blue cells highlighted below. In all cases, unless otherwise directed,

use the earliest appearance of the data in your formulas, usually the Given Data section.

Heavy Metal Corporation is expected to generate the free cash flows in the table below over the next five

years. After $5$ years, the free cash flows are expected to grow at the industry average of

$4\%$ per year. Using the discounted free cash flow model and a weighted average cost of capital of $14\%$ :

a$.$ Estimate the enterprise value of Heavy Metal.

b$.$ If Heavy Metal has no excess cash, debt of $$300$ million, and $40$ million shares outstanding, estimate

its share price.

Year

Free Cash Flow $($million$)$

Growth rate

Number of periods

Average cost of capital

$5$

a$.$ Estimate the enterprise value of Heavy Metal.

Cash flow in year $6($million$)$

Value in year $5($million$)$

Enterprise value $($million$)$

b$.$ If Heavy Metal has no excess cash, debt of $$300$ million, and $40$ million shares outstanding, estimate

its share price.

Excess cash $($million$)$

Debt $($million$)$

Number of shares $($million$)$

Price per share