Free Cash Flow Model
A financial analyst wants to estimate the value of Hasbro using the FCF Model. Suppose the analyst has found that Hasbro has EBIT last year of $40 million, a depreciation expense of $4 million, a capital expenditure of $5 million and a change in net working capital of $3 million. Hasbro has equity of $150 million with a debt of $45 million and faces a tax rate of 30 percent. FCF is expected to grow at a rate of 3 percent. The risk-free rate is 4 percent, the expected return on the market is 11 percent and the reported beta is 1.4.
(a) Using the above information calculate the asset beta (βA) and the required rate of return (k).
(b) Using the above information , what is the Free Cash Flow for Hasbro?
(c) Assume that there are 2.5 million Hasbro shares outstanding. Using the above information and your answers from Parts (a) and (b), what is the equity value per share for Hasbro?