Reference no: EM132149233
TOY is a leading company in the toy and game industry. Analysts make the following forecast for the forecast horizon of 20X5 and 20X7. The company has shares outstanding of 100 million at the end of 20X4A. Assume that TOY's cost of equity is 12%. (Rounding up numbers to 2 decimal places, and showing the workings of calculations)
20X4A ($ Millions):
Free cash flow to equity holders: -
Equity (closing balance): 348
Net profit: -
20X5F ($ Millions):
Free cash flow to equity holders : 145
Equity (closing balance) : 400
Net profit : 197
20X6F ($ Millions):
Free cash flow to equity holders : 157
Equity (closing balance) : 443
Net profit : 200
20X7F ($ Millions):
Free cash flow to equity holders : 160
Equity (closing balance) : 518
Net profit : 235
Q: What is the equity value of TOY at the end of 20X4A using the discounted cash flow model if analysts forecast the company's free cash flows to equity holders will grow at 3% p.a. constantly beyond the forecast horizon?