The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you have done in previous problem, but it focuses on a firm's free cash flow (FCFs) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analyst use the corporate valuation model.
Triptych Food Corp. has an expected net operating profit after taxes, EBIT (1 - T), of $13,300 million in the coming year. In addition, the firm is expected to have net capital expenditure of $1,995 million, and net operating working capital (NOWC) is expected to increase by $30 million. How much free cash flow (FCF) is Triptych Food Corp. expected to generate over the next year?
- $207,441 million
- $415,265 million
- $11,335 million
- $11,275 million
Triptych Food Corp. FCFs are expected to grow at the constant rate of 4.62% per year in the future. The market value of Triptych Food Corp.'s outstanding debt is $54,911 million, and preferred stocks' value is $30,506 million. Triptych Food Corp. has 450 million shares of common stock outstanding, and its weighted average cost of capital (WACC) equals 13.86%
|
Term
|
Value (Millions)
|
|
Total firm value
|
$396,177.60
|
|
Value of common equity
|
$36,606.81
|
|
Intrinsic value per share
|
$148.14
|
Using the preceding information and the FCF you calculated in the previous question, calculate the appropriate values in this table.