Question:
Analysts are forecasting that SimpleCorp will report free cash flow in the coming years as follows:
1: $45
2: $58
3: $40
4: $50
5: $60
In addition, analysts expect SimpleCorp shares to experience no multiple expansion or contraction and therefore to trade throughout the forecast an industry-standard Enterprise Value/Free Cash Flow (trailing) multiple of 12.0x. SimpleCorp reports a strong balance sheet, with cash of $50 and Debt outstanding of $150 and 100 shares outstanding.
If your required rate of return for equity investments of similar risk is 12%, what Enterprise Value would you place on SimpleCorp today and what Price per Share should you be willing to pay.