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Jackson Inc. is in significant financial trouble. It reported operating losses of $20 million in...

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Finance

Jackson Inc. is in significant financial trouble. It reported operating losses of $20 million in the most recent year on revenues of $ 100 million. The total book value of capital invested in the firm today is $190 million. Cost of capital is 12%. Assuming that the firm will revert back to health in 3 years, you have forecast revenues and after-tax income (numbers are in millions are provided in the table below).

Year 1

Year 2

Year 3

Revenue

150

160

180

Net Income

-15

15

25

Depreciation

15

20

25

Cap. Ex

5

25

40

Free Cash Flow (FCF)

-5

10

10

Estimate the Net Present Value of Free Cash Flows over the first 3 years. This Net Present Value is closest to ____.

Using the Free Cash Flow (FCF) in year 3, and assuming the firm will be able to grow at 2.5% and maintain the cost of capital it had in year 3, estimate the terminal value of the firm at the end of year 3

Jackson Inc. has debt with market value of $70 mln. If there are 20 million shares outstanding, estimate the price per share.

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