Develop a discounted cash flow analysis of the value of Kohler stock by:
1 Calculate the annual historic and projected net cash from operations and investment.
Rely on Exhibits 3c (historic cash flows) and 6c (projected cash flows)
Recognize that the cash flow from the business will NOT include the cash from financing.
2 Calculate the Present Value of the cash flows from the date of the valuation until the end of the forecasted cash flows.
For this exercise, use an 8% discount rate.
3 Calculate a terminal value to add to the PV from step 2 above by:
Recognize that the terminal value is supposed to represent the total value of cash flows from Kohler out past the end of the forecast period.
It is calculated as a perpetuity with some given cash flow and growth rate.
Compute a compound annual growth rate (CAGR) for:
Kohler actual net cash flow
Kohler projected net cash flow
Kohler total (actual & projected) net cash flow
Select a CAGR to use in the terminal value formula.
Use the final year's projected cash flow and your CAGR to compute the terminal value using the same 8% discount rate.
4 Discount the terminal value back to the date of the valuation
The terminal value will be implicitly discounted back to the end of the forecast period. You need to discount it back a few years to the date of the valuation.
5 Add together your result from 2 and 4 to obtain the total market value of the Kohler Co.
6 Divide by the total number of shares of Kohler to arrive at a valuation for a single share of Kohler.
Develop a market-based valuation for Kohler stock by:
Write a brief opinion on the value of a privately-held share of Kohler giving:
Attachment:- Exhibits.xlsx