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Q1.: At the beginning of its fiscal year 2021, an analyst made the following forecast...

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Finance

Q1.: At the beginning of its fiscal year 2021, an analyst made the following forecast for Generic Inc., the consumer foods company, for 20212023 (in millions of dollars):

2021F 2022F 2023F 2024F

Free cash flow to equity 1,714 1,677 1,653 1,637 holders

Use a required return of 9 percent. Assume that free cash flow will grow at 3 percent per year after 2024. Develop an Excel template to calculate the following:

  1. a) present value of FCFE over 2021-2024.

  2. b) present value of the terminal value of FCFE beyond 2024

  3. c) total value of the firm

  4. d) Generic had 369 million shares outstanding at the end of 2020, trading at $47 per

    share. Calculate value per share.

  5. e) Based on the given data, what should be the investment strategy?

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