A company is projected to generate free cash flows of $85 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%. It has $250 million of debt and $12 million in cash. There are 30 million shares outstanding. Comparable companies trade at an average EV/FCFF multiple of 9. Using the exit multiple method for terminal value and DCF for the rest, what is your estimate of its share price?
|Terminal value = 85 * 9||765.00|
|Total cash flow||85.00||850.00|
|Present value calculation||=85/(1+11%)^1||=850/(1+11%)^2|
|Enterprise value = Total PV of cash flow|
|Enterprise value = 766.46|
|Equity value = Enterprise value - Debt + Cash|
|Equity value = 766.46 - 250 + 12|
|Equity value = 528.46|
|Share price = Equity value / No. of shares|
|Share price = 528.46 / 30|
|Share price = 17.62|
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