Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: (Click onthe following icon in order to copy its contents into a spreadsheet.)YearFCF ($ million)152.4267.9379.3473.1581.9After that, the free cash flows are expected to grow at the industry average of 4.1% per year. Using the discountedfree cash flow model and a weighted average cost of capital of 14.7%:a. Estimate the enterprise value of Heavy Metal.b. If Heavy Metal has no excess cash, debt of $320 million, and 44 million shares outstanding, estimate its shareprice.

Concept. Value of firm = value of equity + value of debt. For calculating value of firm , present…

Answered: Heavy Metal Corporation is expected to…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter21: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 9P

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Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The discount factor for year 1 is 0.89 and for year 2 is 0.80. The NPV is a. 0 b. 6,800 c. 1,400 d. (4,000)
Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: (Click on the following icon in order to copy its contents into a spreadsheet.) Year FCF ($ millions) 1 54.4 2 66.8 3 77.2 4 73.5 5 80.7 After that, the free cash flows are expected to grow at the industry average of 3.5% per year. Using the discounted free cash flow model and a weighted average cost of capital of 13.8%: a. Estimate the enterprise value of Heavy Metal. b. If Heavy Metal has no excess cash, debt of $315 million, and 37 million shares outstanding, estimate its share price.
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UBTECH Robotics is expected to generate the following free cash flows over the next fiveyears. After which, the free cash flows are expected to grow at the industry average of 3% peryear. Using the discounted free cash flow model and the weighted average cost of capital of11%UBTECH Robotics FCF Forecast ($ Millions)Year199920002001200220032004FCF (Amount in Millions)$55$45$89$102$84$87a. Estimate the enterprise value (V0) of UBTECH Robotics.b. If UBTECH Robotics has excess cash of $5.6 Billion, a debt of $800 Million and 50 Millionshares outstanding, estimate its share price (P0).
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Kabab Co. is considering a $240,000 investment, which will provide net returns of $110,000, $160,000, and $220,000 in the second, third, and fourth years, respectively. What is the payback period? Round up to the next month Use the following table: Cumulative Cash Cash Outflow Çash Inflow Net Cash Year Flow Flow 2 years and 10 months Ob. 2 years and 9 months 2 years and 11 months Od. 2 years and 8 months

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