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You must estimate the intrinsic value of Mobile Technologies' stock. The end-of-year free cash flow is...

You must estimate the intrinsic value of Mobile Technologies' stock. The end-of-year free cash flow is expected to be $5 million for the first two years and $27 million for year 3, and it is expected to grow at a constant rate of 7.0% a year thereafter. The company's WACC is 10.0%, it has $125.0 million of long-term debt plus preferred stock outstanding, and there are 15.0 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock?

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Answer #1

Value of firm is calculated in excel and screen shot provided below:

Value of firm is $752.48.

Value of total equity = Value of firm - Value of long term debt

= $752.48 - $15

= $627.48 million.

Value of total equity is $627.48 million.

Intrinsic value of equity = Total Value of equity / Number of share outstanding

= $627.48 / 15

= $41.83

Intrinsic value of equity is $41.83.

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