The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFS) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. Tropetech Inc. has an expected net operating profit after taxes, EBIT(1-T), of $2,400 million in the coming year. In addition, the firm is expected to have net capital expenditures of $360 million, and net operating working capital (NOWC) is expected to increase by $45 million. How much free cash flow ( FCF) is Tropetech Inc. expected to generate over the next year? $2,085 million $2,715 million $43,481 million $1,995 million Tropetech Inc.'s FCFS are expected to grow at a constant rate of 3.90% per year in the future. The market value of Tropetech Inc.'s outstanding debt is $11,510 million, and its preferred stocks' value is $6,394 million. Tropetech Inc. has 675 million shares of common stock outstanding, and its weighted average cost of capital (WACC) equals 11.70%. Term Value (Millions) Total firm value Intrinsic value of common equity Intrinsic value per share Using the preceding information and the FCF you calculated in the previous question, calculate the appropriate values in this table. Assume the firm has no nonoperating assets.
The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFS) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. Tropetech Inc. has an expected net operating profit after taxes, EBIT(1-T), of $2,400 million in the coming year. In addition, the firm is expected to have net capital expenditures of $360 million, and net operating working capital (NOWC) is expected to increase by $45 million. How much free cash flow ( FCF) is Tropetech Inc. expected to generate over the next year? $2,085 million $2,715 million $43,481 million $1,995 million Tropetech Inc.'s FCFS are expected to grow at a constant rate of 3.90% per year in the future. The market value of Tropetech Inc.'s outstanding debt is $11,510 million, and its preferred stocks' value is $6,394 million. Tropetech Inc. has 675 million shares of common stock outstanding, and its weighted average cost of capital (WACC) equals 11.70%. Term Value (Millions) Total firm value Intrinsic value of common equity Intrinsic value per share Using the preceding information and the FCF you calculated in the previous question, calculate the appropriate values in this table. Assume the firm has no nonoperating assets.
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter13: Valuation: Earnings-based Approach
Section: Chapter Questions
Problem 1QE
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Transcribed Image Text:The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the
economic value added (EVA) approach are some examples of valuation techniques. The
corporate valuation model is similar to the dividend-based valuation that you've done in
previous problems, but it focuses on a firm's free cash flows (FCFS) instead of its dividends.
Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason,
some analysts use the corporate valuation model. Tropetech Inc. has an expected net
operating profit after taxes, EBIT(1-T), of $2,400 million in the coming year. In addition,
the firm is expected to have net capital expenditures of $360 million, and net operating
working capital (NOWC) is expected to increase by $45 million. How much free cash flow (
FCF) is Tropetech Inc. expected to generate over the next year? $2,085 million $2,715
million $43,481 million $1,995 million Tropetech Inc.'s FCFs are expected to grow at a
constant rate of 3.90% per year in the future. The market value of Tropetech Inc.'s
outstanding debt is $11,510 million, and its preferred stocks' value is $6,394 million.
Tropetech Inc. has 675 million shares of common stock outstanding, and its weighted
average cost of capital (WACC) equals 11.70%. Term Value (Millions) Total firm value
Intrinsic value of common equity Intrinsic value per share Using the preceding information
and the FCF you calculated in the previous question, calculate the appropriate values in this
table. Assume the firm has no nonoperating assets.
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