Problem: Abbey Naylor, CFA, has been directed by Carroll to determine the value of Sundanci's stock using the free cash flow to equity model. Naylor believes that Sundanci's FCFE will grow at 27 percent for two years and 13 percent thereafter. Capital expeditures, depreciation, and working capital are all expected to increase proportionately with FCFE.
1) Calculate the amount of FCFE per share for the year 2000 using the data below.
INCOME STATEMENT: 1999 2000
Revenue $474 $598
Depreciation 20 23
Other Operating Costs 368 460
Income Before Taxes 86 115
Taxes 26 35
Net Income 60 80
Dividends 18 24
EPS $0.714 $0.952
Dividend Per Share $0.214 $0.286
Common Shares Outstanding 84mil 84mil
BALENCE SHEET:
Current Assets $201 $326
Net, PPE 474 489
Total Assets 675 815
Current Liabilities 57 141
Long-term Debt 0 0
Total Liabilities 57 141
Shareolders Equity 618 674
Total liab. & Equity 675 815
Capital Expenditures 34 38
2) Calculate the current value of a share of Sundanci stock based on the two-stage FCFE model. Show work.