What is the intrinsic value per share of moose service

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Reference no: EM131923945

(FCFE valuation model) From the text,

FCFF = EBIT(1-t) + Dep – Capex – InvWC, and FCFE = FCFF – Int(1-t) + net borrowing. Or FCFE = EBIT(1-t) + Dep – Capex – InvWC – Int(1-t) + net borrowing. Since EBIT(1-t) – Int(1-t) = NI, we can use FCFE = NI + Dep – Capex – InvWC + net borrowing.

Value the shares of Moose Service Co. The modeling assumptions are:

• Current sales are $60 million. They will grow at 30% annually for the first four years, and then grow at 6% annually thereafter.

• Net income will be 10% of sales.

• The net investment in fixed capital (Capex – Depr) will be 50% of the sales increase each year

• The investment in working capital will be 10% of the sales increase.

• Debt financing will be 40% of the net investments in fixed capital and working capital each year

• The required rate of return for equity is 11%.

• There are 2 million outstanding shares.

What is the intrinsic value per share of Moose Service?

Reference no: EM131923945

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