Reference no: EM131930233

The major focus of the project is to calculate and justify your estimate of the price/share of equity using the FCF Method. Many other elements of the project are necessary in order to complete a satisfactory project. Minimally, these include: 1), An example is given on CH12 for MicroDrive case. Completing 5-year pro-formas for your firm. The pro formas serve as the central element of your project. Many steps lead up to the pro formas, and many important steps follow from the pro forma. All of your estimates should include appropriate justification/ support/ explanation. Many of the estimates of growth rates and ratios needed below can be calculated using regression analysis. 2), Growth. You will need to calculate the historical growth in dividends or in revenue for your firm (in order to obtain an estimate of future growth). The method for estimating growth is illustrated by an example of dividend growth for Firm XXX. – the related excel file is provided under the name of“Growth estimate sheet”. Data Needed to Construct the Pro Formas * Dividend data: * An Excel spreadsheet that you use to construct your pro formas. Please check the MicroDrive example on chapter 12. This file “automatically” completes the 5 years of pro formas for you; given that you have input the data and assumptions correctly. * Two years of the firm’s historical financial statements, including annual balance sheets, and income statements (these form the basis of your pro formas).? You may also want to download 5-10 year historical data to do a better estimate. This data may be downloaded at Mergent-Online?(available through the university library). *??Estimates of the company’s current and future (long-term normal – gn) sales growth (this should be completed in the same manner that you calculate dividend growth for a company) – you may use the?Growth estimate sheet?available as a guide.? Use the 10 years of financial statements for the historical sales figures.? *A justification of your choice of constant or non-constant ratios when completing the pro-formas (the base case should usually be the constant ratio approach as discussed in the text). *An estimate of the firm’s target capital structure (see the guideline below about calculating a Firm’s WACC) – note that you need these weights both for the WACC. *An estimate of the firm’s dividend payout policy. *The firm’s tax rate.