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Widget Inc. is expected to have the following free cash flows: Year 1 2 3 4 5 FCF $Millions 22 27 32 36 38 After then, the free cash...

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Question

Finance

  1. Widget Inc. is expected to have the following free cashflows:

Year

1

2

3

4

5

FCF $Millions

22

27

32

36

38

After then, the free cash flows areexpected to grow at the industry average of 5% per year. Using thediscounted free cash flow model and the weighted average cost ofcapital of 10%:

a. Estimate Widget Inc. enterprisevalue

b. If Widget Inc. has 10 million incash, 3 million in debt, and 10 million shares outstanding what istheir estimated share price?

Answer & Explanation Solved by verified expert
3.7 Ratings (338 Votes)
Following table shows the calculation of enterprise valueYearFCF MillionsDiscount factorDiscounted    See Answer
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Transcribed Image Text

Widget Inc. is expected to have the following free cashflows:Year12345FCF $Millions2227323638After then, the free cash flows areexpected to grow at the industry average of 5% per year. Using thediscounted free cash flow model and the weighted average cost ofcapital of 10%:a. Estimate Widget Inc. enterprisevalueb. If Widget Inc. has 10 million incash, 3 million in debt, and 10 million shares outstanding what istheir estimated share price?

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