Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Thereafter, the free cash flows are expected to grow at the industry average of 4.5% per year. Using the discounted free 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 $280 million, and 36 million shares outstanding, estimate its share price. a. Estimate the enterprise value of Heavy Metal. The enterprise value will be $ million. (Round to two decimal places.) b. If Heavy Metal has no excess cash, debt of $280 million, and 36 million shares outstanding, estimate its share price. The stock price per share will be $ (Round to the nearest cent.)

Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter21: Dynamic Capital Structures And Corporate Valuation
Section: Chapter Questions
Problem 9P
Question
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Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Thereafter, the free cash flows are expected to grow at the industry average of 4.5% per
year. Using the discounted free 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 $280 million, and 36 million shares outstanding, estimate its share price.
a. Estimate the enterprise value of Heavy Metal.
The enterprise value will be $
million. (Round to two decimal places.)
b. If Heavy Metal has no excess cash, debt of $280 million, and 36 million shares outstanding, estimate its share price.
The stock price per share will be $ (Round to the nearest cent.)
Transcribed Image Text:Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: Thereafter, the free cash flows are expected to grow at the industry average of 4.5% per year. Using the discounted free 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 $280 million, and 36 million shares outstanding, estimate its share price. a. Estimate the enterprise value of Heavy Metal. The enterprise value will be $ million. (Round to two decimal places.) b. If Heavy Metal has no excess cash, debt of $280 million, and 36 million shares outstanding, estimate its share price. The stock price per share will be $ (Round to the nearest cent.)
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