Exam 11: Corporate Valuation

Barnette Inc.'s free cash flows are expected to be unstable during the next few years while the company undergoes restructuringHowever, FCF is expected to be $50 million in Year 5, i.e., FCF at t = 5 equals $50 million, and the FCF growth rate is expected to be constant at 6% beyond that point If the weighted average cost of capital is 12%, what is the horizon value (in millions) at t = 5?

Furniture forecasts a free cash flow of $40 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5% thereafter If the weighted average cost of capital is 10% and the cost of equity is 15%, what is the horizon value, in millions at t = 3?

Which of the following is NOT normally regarded as being a barrier to hostile takeovers?

Based on the corporate valuation model, Bizzaro Co.'s value of operations is $300 million The balance sheet shows $20 million of short-term investments that are unrelated to operations, $50 million of accounts payable, $90 million of notes payable, $30 million of long-term debt, $40 million of preferred stock, and $100 million of common equity Bizzaro has 10 million shares of stock outstanding What is the best estimate of the stock's price per share?