Question

Shaq Fu Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows during the next 3 years, after which FCF is expected to grow at a constant 5.00% rate. Shaq Fu's cost of capital is 11.00%. Shaq Fu has 9.00 million shares outstanding, and carries 86.00 million in debt. YEAR FCF -$24.00 $40.00 $35.00 (All Free cash flows above are expressed in millions of dollars) What is the terminal value at year 3? Submit Answer format: Currency: Round to: 2 decimal places. What is the value of the firm today? (in millions) Submit Answer format: Currency: Round to: 2 decimal places. Based on the number of shares and debt position of Shaq Fu, what is their equity value per share? Submit Answer format: Currency: Round to: 2 decimal places.

Answer 1

	WACC=	11.00%
Year	Previous year FCF	FCF growth rate	FCF current year	Terminal value	Total Value	Discount factor	Discounted value
1	0	0.00%	-24		-24	1.11	-21.6216
2	-24	0.00%	40		40	1.2321	32.4649
3	40	0.00%	35	612.5	647.5	1.367631	473.44642
	Long term growth rate (given)=	5.00%			Value of Enterprise =	Sum of discounted value =	484.29
Where
Total value = FCF + horizon value (only for last year)
Horizon value = FCF current year 3 *(1+long term growth rate)/( WACC-long term growth rate)
Discount factor=(1+ WACC)^corresponding period
Discounted value=total value/discount factor

Enterprise value = Equity value+ MV of debt

484.29 = Equity value+86

Equity value = 398.29

share price = equity value/number of shares

share price = 398.29/9

share price = 44.25