6. Zaap Company is a privately held start-up that offers inventory management services to clients. Thefirm plans to sell its shares to the public within next 18 months and wants to get some idea about whatthe firm's stock will be worth. An investment banker who specializes in assisting high-tech start-ups togo public has evaluated and developed the following data:SalesOperating Income (EBIT)Tax rate is 30%.Less investments:Investment in net working1100,00016,0002Years115,00018,400capital1,695.651,950Capital expenditures(CAPEX) 2,347.83 2,7003132,25021,1602,242.503,1054132,25021,160The company will grow at a rate of 15 % during the first two years and no growth in sales is foreseenthereafter. Furthermore the firm's investment banker had done a study of the firm's cost of capitaland estimated the weighted average cost of capital to be 12%.a. Estimate the free cash flows for the four years. Assume year 4 cash flows will continueindefinitely.b.What is the value of Zaap Company based on these estimates?c. If Zaap.Com has 2,000 shares of common stock outstanding and liabilities valued at $ 4,000,what is the value per share of its stock?

Free cash flow is the cash available after deduction of capital expenses and net working capital…

a privately start-up ventory management to rm plans to sell its shares to the public within next 18 months and wants to get some idea about w e firm's stock will be worth.An investment banker who specializes in assisting high-tech start-up o public has evaluated and developed the following data: ales perating Income (EBIT) 1 100,000 16,000 2 Years 115,000 18,400 3 132,250 21,160 4 132,250 21,160

a privately start-up ventory management to rm plans to sell its shares to the public within next 18 months and wants to get some idea about w e firm's stock will be worth.An investment banker who specializes in assisting high-tech start-up o public has evaluated and developed the following data: ales perating Income (EBIT) 1 100,000 16,000 2 Years 115,000 18,400 3 132,250 21,160 4 132,250 21,160

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter12: Corporate Valuation And Financial Planning

Section: Chapter Questions

Problem 7P: Upton Computers makes bulk purchases of small computers, stocks them in conveniently located...

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