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Estimate the value of IDX per share

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Question - IDX Technologies is a privately held developer of advanced security systems based in Chicago. As part of your business development strategy, in late 2008 you initiate discussions with IDX's founder about the possibility of acquiring the business at the end of 2008. Estimate the value of IDX per share. What is the company P/E ratio based on 2011 earnings? How much are the dividends for 2012 year? Use the following information:

Shares outstanding: 50 million

Expected free cash flow (FCF) in 2009: $45 million

Expected free cash flow (FCF) in 2010: $50 million

Free cash flow grows 15% in 2011

Free cash flow grows 8% in 2012

Free cash flow grows 5% per year for all subsequent years (Future free cash flow (FCF) growth rate beyond 2012: 5%)

Rate of return: 9.4%

Assume earnings grow at 8% per year

Sales in 2010: $650 million

Profit margin: 12%

In 2010 IDX Technologies Company will pay out $0.35 of 2010 year earnings per share to shareholders in the form of a dividend. Payout ratio stays the same over time.

Reference no: EM132910613

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