Hi...need help with formula and calculations. . Problem 9-19 Start (1)xlsx- Exce

Question

Hi...need help with formula and calculations.

. Problem 9-19 Start (1)xlsx- Excel Orlena Bolder - File Insert Page Layout Formulas Data Review ViewTell me what you want to do Cut Be Copy wrap Text AutoSum A General Paste Sort & Find & r u . ·· · Merge & Center. $. % , 58Conditional Format as Cel Insert Delete Format Clear. Format Psinter Formatting. Table Styles Filter Select Clipboard Number Cells Editing S39 Problem 9-19 Heavy Metal Corporation is expected to generate the following free cash flows over the next five vears: Year FCF (million) $53 $68 $78 $75 $82 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 enterprise value of Heavy Metal b. If Heavy Metal has no excess cash, debt of S300 million, and 40 million shares outstanding, estimate 10 12 Cost of capital Long-run growth rate | 14.00% 4.00% Year FCF (million) Terminal value (million) Total cash flow (millionS53.00S68.00S78.00$75.00 Estimate the enterprise value of IHeavy Metal 9-19 S53.00 S68.00 S78.00$75.00$82.00 18 19 21 Ready + 80%

Explanation / Answer

G19: Terminal value = $82/((cost of capital - long term growth rate) *(1.14))

= $82/((.14 - .04)*1.14) = $719.3

G20: total cashflow year 4 is = $75 + $719.3 = $794.3

D24: Enterprise value = 53/1.14 + 68/1.14^2 + 78/1.14^3 + 794.3/1.14^4 = $610.21

D31: Equity value = enterprise value - debt value = 610.21 - 300 = $310.21 Million

D32: Stock price = 310.21/40 = $7.755

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