Question

need NSWER FOR THE SECOND ONE THANKYOU

Answer 1

2.

We have following information about Ensong Corp.

WACC(k) = 9.5%

FCFF grow for next two years(G1) = 20%

FCFF grow indefinitely after 2 year(G2) = 4%

Free cash flow to Firm = $ 181 millions .. (for calculation please refer to below spreadsheet)

In order to calculate Price Per Share of Ensong Corp., We first calculate the Value of Firm using FCFF.

$Value of Firm = \sum_{n=1}^{n}\frac{FCFF_{1}}{(1+k)^1}+\frac{FCFF_{2}}{(1+k)^2}+....\frac{FCFF_{n}}{(1+k)^n}+\frac{Terminal Value}{(1+k)^{n+1}}$

Where,

k = Weighted average cost of capital

n= year

Terminal Value = PV of constant growing FCFF

$Terminal Value = \frac{FCFF}{k-g}$

where,

FCFF = Free cash flow to firm growing at constant rate of growth

g = growth rate

k = wacc

Calculation of Value of Firm

Please refer below sheet.

Formula reference -

Thus, Value of Firm = $ 4,169.52 millions.

Now, Assuming the value of Debt and Preferred stock in balance sheet is market value of them

Therefore, Value of common Equity = Value of Firm - Debt - Preferred stock

= 4,169.52-963-10

= $ 3,196.52 millions

Price Per Share = Value of common equity/no. of common stock

= 3,196.52/100

= $ 31.97

for calculation of free cash flow please refer to below spreadsheet.