Calculate intrinsic value of HCBs equity as of end of year

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Reference no: EM131917994

HCB's most recent and projected financial statements and projected free cash flow are shown below. All items are expected to grow at 5% after the last year of projections.

2017 2018E 2019E

Debt $ 40.00 $47.00 $53.00

nterest expense $2.80 $3.30 $3.70

Free cash flow $17.00 $14.00 $22.00

Tax rate 40%

WACC 8%

Levered required return on equity 12%

Unlevered required return on equity 10%

growth rate after 2019 5%

1. Calculate the value of HCB's tax shields as of the end of 2017?

2. Using the APV model, calculate the intrinsic value of HCB's equity as of the end of 2017?

3. Using the FCFE model, calculate the intrinsic value of HCB's equity as of the end of 2017?

Reference no: EM131917994

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