Question: Selected data for the ABC Corporation are shown below. Use the data to answer the following questions. Assume growth becomes constant (5%) after Year 4

Selected data for the ABC Corporation are shown below. Use the data to answer the following questions. Assume growth becomes constant (5%) after Year 4 INPUTS (In millions) Free cash flow Marketable Securities Marketable Securit payable Lotes payable Preferred stock WACC Number of shares of stock the Year-4 free cash flow). Assume arowth becomes constant (5\%) after Year Current Projected 2 Free cash flow Long-term constant growth in FCF after year 4 Horizon value (HV4) at Year 4 b. Calculate the present value of the horizon value, the present value of the free cash flows, and the estimated Year- 0 value of operations. PV (at Year-0) of horizon value (HV4) PV (at Year-0) of FCF Year 1-4 Value of operations (PV of FCF for year 1-4 + PV of HV4) c. Calculate the estimated Year- 0 price per share of common equity. Value of operations Plus value of marketable securities Total value of company Less value of debt Less value of preferred stock Estimated value of common equity Price per share of shares Price per share
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
