Angel Enterprise was going public in 2018. You were wondering whether the $30 per share offer...

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Finance

Angel Enterprise was going public in2018. You were wondering whether the $30 per share offer price is afair price. You decided to use discounted cash flow approach tovalue the company’s stock. You gathered the following data:
Year
FCF
Other Data
2019
$600,000
Growth rate of FCF beyond 2023 = 3%
2020
$900,000
Weighted Average Cost of Capital (WACC) = 10%
2021
$1,400,000
The firm has no debt
2022
2023
$1,800,000
$2,500,000
Number of common shares outstanding = 1,000,000
a. Based on your valuation, what isthe common stock per share? Is the stock worth buying?
b. What is the common stock per shareif the terminal growth rate (growth rate beyond 2023) were 5%instead of 3%?
Please cut and paste your Excel spreadsheet here.
** I need help with the equations

Answer & Explanation Solved by verified expert

3.7 Ratings (517 Votes)

2019 2020 2021 2023 2024 FCF 600000 900000 1400000 1800000 2500000 PVIF at 10 090909 082645 075131 068301 062092 PV at 10 545455 743802 1051841 1229424 1552303 Cumulative PV t1 to t4 5122824 Continuing See Answer

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Transcribed Image Text

Angel Enterprise was going public in2018. You were wondering whether the $30 per share offer price is afair price. You decided to use discounted cash flow approach tovalue the company’s stock. You gathered the following data:YearFCFOther Data2019$600,000Growth rate of FCF beyond 2023 = 3%2020$900,000Weighted Average Cost of Capital (WACC) = 10%2021$1,400,000The firm has no debt20222023$1,800,000$2,500,000Number of common shares outstanding = 1,000,000a. Based on your valuation, what isthe common stock per share? Is the stock worth buying?b. What is the common stock per shareif the terminal growth rate (growth rate beyond 2023) were 5%instead of 3%?Please cut and paste your Excel spreadsheet here.** I need help with the equations

Year	FCF	Other Data
2019	$600,000	Growth rate of FCF beyond 2023 = 3%
2020	$900,000	Weighted Average Cost of Capital (WACC) = 10%
2021	$1,400,000	The firm has no debt
2022 2023	$1,800,000 $2,500,000	Number of common shares outstanding = 1,000,000