FCFE valuation model (attached file)

FCFE valuation model (attached file)

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Shady Sunglasses operates retail sunglass kiosks in shopping malls. Below is information related to the company:
(dollar amounts in thousands)
2014
2015
2016
2017
2018
2019
Net Cash Flow from Operations
564
628
854
1059
1345
1655
Interest Expense after tax
122
134
148
145
155
148
Decrease (Increase) in Cash
Required for Operations
-75
-54
-48
-32
-61
-48
Net Cash Flow from Investing
-287
-300
-310
-285
-294
-277
Net Cash from Debt Financing
210
204
140
85
-40
-46
Present Value Factors (R
e
=
8.5%)
0.922
0.849
0.783
0.722
0.665
Common Shares Outstanding
in thousands
1,512
Required:
1.
Using the above information and assuming that steady-state growth of FCFE in year 2019 and
beyond will be 4%, calculate Shady Sunglasses’ current stock value per share using FCFE
valuation model.
Remember to adjust the present value for midyear discounting.
2.
Using the above information and assuming that steady-state growth of FCFF in year 2019 and
beyond will be 4%, and WACC = 8.5%, compute Shady Sunglasses’ current firm value per
share using FCFF valuation model.
Remember to adjust the present value for midyear discounting.
1

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