Keyence Corporation\'s stock is trading at ¥59,270 per share. Based on your anal
ID: 2821830 • Letter: K
Question
Keyence Corporation's stock is trading at ¥59,270 per share. Based on your analysis, you estimate it will earn after-tax cash profits of 234,552M, x278,726M, x330,421M, X386,967M, and 442,654M in the middle of each of the next five years, respectively From that point onward, you believe its after-tax cash profits will grow by 3% per year forever. You believe, based on returns of similarly risky investments, your discount rate is 9%. Finally, Keyence has no debt or other claims, x1,224,265M in cash and 121M shares of stock outstanding. Should you invest in Keyence's stock? 1.Explanation / Answer
Free cash flow to firm = yen 6205520.46
cash = yen 1224265
Free cash flow to equity = 4981255.46
Stock price = 4981255.46/121 = yen 41167.4
stock is treding at yen 59270 which is greater than the fair value of stock thus one should not invest in the stock.
Year 1 2 3 4 5 terminal Value Cashflow 234552.00 278726.00 330421.00 386967.00 442654.00 7598893.67 PV 215185.32 234598.10 255145.64 274137.18 287694.73 4938759.50 PV of all cashflow 6205520.46Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.