Venice Surf Co. expects to generate free cash flows of $2,933 million in 2018, $3,361 million in 2019, and $4,820 million in 2020. In addition, the terminal or horizon value at year-end 2020 of all free cash flows generated after 2020 is $35,413 million. The company has nonoperating assets of $4,839 million and nonoperating liabilities of $8,143 million and there are 950 million shares outstanding. Estimate the value (per share) or each share of common stock using the free cash flow information above, and assuming a discount rate of 13.18%. Present your answer to two decimal places (e.g., $20.00).
| Project | |||||
| Discount rate | 13.180% | ||||
| Year | 0 | 1 | 2 | 3 | 4 |
| Cash flow stream | 0.000 | 2933.000 | 3361.000 | 4820.000 | 35413.000 |
| Discounting factor | 1.000 | 1.132 | 1.281 | 1.450 | 1.641 |
| Discounted cash flows project | 0.000 | 2591.447 | 2623.790 | 3324.589 | 21581.616 |
| NPV = Sum of discounted cash flows | |||||
| Enterprise value | 30121.44 | ||||
| Where | |||||
| Discounting factor = | (1 + discount rate)^(Corresponding period in years) | ||||
| Discounted Cashflow= | Cash flow stream/discounting factor | ||||
share price = (enterprise value-non operating liabilities )/share outstanding
=(30121.44-8143)/950
=23.16
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