WWA is looking at one of their subsidiaries, Gossamer Glue Company, which has run into difficulties. There
Question:
WWA is looking at one of their subsidiaries, Gossamer Glue Company, which has run into difficulties. There have been technological innovations in both products and process that GGC presently does not have access to. The finance team has ascertained the following values:
a. Unless new technology is introduced, Gossamer is expecting free cash flows to remain flat for the foreseeable future. Calculate the intrinsic value of GGC, the intrinsic value of its equity and the intrinsic per share value of its stock. (Hint: Constant free cash flows.)
b. Recent competitive reports now indicate that Gossamer should expect free cash flows to fall by 2% per year beginning this year without the introduction of new technology. Calculate the intrinsic value of the company and the per share value of the stock. (Hint: Constant Growth free cash flows.)
Introduction to Operations Research
ISBN: 978-1259162985
10th edition
Authors: Frederick S. Hillier, Gerald J. Lieberman