Question

TRX Corporation is expected to generate free cash flows (FCF) of $6.7 million in year 1,...

TRX Corporation is expected to generate free cash flows (FCF) of $6.7 million in year 1, $9.99 million in year 2, $12.06 million in year 3, and $14.81 million in year 4. After then, the FCF will grow by 3% per year. TRX has 10 million shares outstanding, $4 million in excess cash, and it has $1 million in debt. If its cost of capital is 6%, the stock price would be $________? Input your answer without the $ sign and round your answer to two decimal places.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Firm Value= Present Value of future free cash flow discounted at cost of capital (6%)

Present Value of FCF of Year 1=6.7/1.06=$6.320755million

Present Value of FCF of Year 2=9.99/(1.06^2)=$8.810965 million

Present Value of FCF of Year 3=12.06/(1.06^3)=$10.125809 million

Present Value of FCF of Year 4=14.81/(1.06^4)=$11.730907 million

FCFGrowth after Year 4 =3%

FCF in Year 5 =14.81*1.03=$15.2543 million

Horizon Value at year4=15.2543/(0.06-0.03)=$508.476667 million

Present Value today of horizon value=508.476667/(1.06^4)=$402.761146 million

Firm Value=Present Value of future Free Cash flows=6.320755+8.810965+10.125809+11.730907+402.761146=$439.749581 million

Firm Value+Cash=Equity+Debt

439.749581+4=Equity Value+1

Equity Value=439.749581+3=$442.749581million

Number of shares outstanding=10 million

The stock price would be $442.749581/10=$44.27

Answer: 44.27

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Heavy Metal Corporation is expected to generate the following free cash flows over the next five​...
Heavy Metal Corporation is expected to generate the following free cash flows over the next five​ years: Year 1 2 3 4 5 FCF​ ($ million) 51.8 67.6 77.2 75.2 81.3 ​Thereafter, the free cash flows are expected to grow at the industry average of 3.6% per year. Using the discounted free cash flow model and a weighted average cost of capital of 13.5%​: a.  Estimate the enterprise value of Heavy Metal. b.  If Heavy Metal has no excess​ cash,...
Heavy Metal Corporation is expected to generate the following free cash flows over the next five...
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Year 1 2 3 4 5 FCF ($millions) 53 68 78 75 82 After then, the free cash flows are expected to grow at the industry average of 4% per year (continuation value). Using the discounted free cash flow model and a weighted average cost of capital of 14%, estimate the approximate share price for Heavy Metal if the firm has $50 million...
Heavy Metal Corporation is expected to generate the following free cash flows over the next five...
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Year 1 2 3 4 5 FCF ($ millions) 53 68 78 75 85 After then, 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 geometric mean growth rate (also known as CAGR=Compound Average Growth Rate) of...
Scampini Technologies is expected to generate $25 million in free cash flow next year, and FCF...
Scampini Technologies is expected to generate $25 million in free cash flow next year, and FCF is expected to grow at a constant rate of 3% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 10%. If Scampini has 45 million shares of stock outstanding, what is the stock's value per share? Do not round intermediate calculations. Round your answer to the nearest cent. Each share of common stock is worth $   , according to the...
Scampini Technologies is expected to generate $50 million in free cash flow next year, and FCF...
Scampini Technologies is expected to generate $50 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 11%. If Scampini has 45 million shares of stock outstanding, what is the stock's value per share? Round your answer to two decimal places. Each share of common stock is worth $____ , according to the corporate valuation model.
Scampini Technologies is expected to generate $150 million in free cash flow next year, and FCF...
Scampini Technologies is expected to generate $150 million in free cash flow next year, and FCF is expected to grow at a constant rate of 7% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 12%. If Scampini has 60 million shares of stock outstanding, what is the stock's value per share? Round your answer to two decimal places. Each share of common stock is worth $ , according to the corporate valuation model.
Scampini Technologies is expected to generate $200 million in free cash flow next year, and FCF...
Scampini Technologies is expected to generate $200 million in free cash flow next year, and FCF is expected to grow at a constant rate of 3% per year indefinitely. Scampini has no debt, preferred stock, or non-operating assets, and its WACC is 14%. If Scampini has 55 million shares of stock outstanding, what is the stock's value per share? Do not round intermediate calculations. Round your answer to the nearest cent. Each share of common stock is worth $   , according...
Praxis Corp. is expected to generate a free cash flow (FCF) of $7,890.00 million this year...
Praxis Corp. is expected to generate a free cash flow (FCF) of $7,890.00 million this year ( FCF1 = $7,890.00 million), and the FCF is expected to grow at a rate of 20.20% over the following two years ( FCF2 and FCF3 ). After the third year, however, the FCF is expected to grow at a constant rate of 2.46% per year, which will last forever ( FCF4 ). If Praxis Corp.’s weighted average cost of capital (WACC) is 7.38%,...
1. 123 Warehousing is expected to generate a free cash flow (FCF) of $5,730.00 million this...
1. 123 Warehousing is expected to generate a free cash flow (FCF) of $5,730.00 million this year (FCF₁ = $5,730.00 million), and the FCF is expected to grow at a rate of 25.00% over the following two years (FCF₂ and FCF₃). After the third year, however, the FCF is expected to grow at a constant rate of 3.90% per year, which will last forever (FCF₄). Assume the firm has no nonoperating assets. If 123 Warehousing’s weighted average cost of capital...
A company is projected to generate free cash flows of $46 million per year for the...
A company is projected to generate free cash flows of $46 million per year for the next two years, after which it is projected grow at a steady rate in perpetuity. The company's cost of capital is 11.6%. It has $23 million worth of debt and $7 million of cash. There are 13 million shares outstanding. If the exit multiple for this company's free cash flows (EV/FCFF) is 14, what's your estimate of the company's stock price? Round to one...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT