The first "target" is in a mature industry. The target is held by two brothers who each have 5 million shares of stock. This company has a free cash flow of 20 million and its WACC is 11%. The free cash flow is estimated to grow at a constant rate of 5%. The company has 100 million of marketable securities, 200 million of debt, %50 million of preferred stock and book equity of $210 million.
The second target is in a growing industry. This company borrowed $40 million to finance its expansion; has no other debt or preferred stock but does have 10 million shares of stock outstanding. It pays no dividend and has no marketable securities.
The questions are: 1) Determine the annual growth rate in assets for each of the years and what these rates indicate to your group. 2) Calculate the company's free cash flow (FCF) for each year in the planning period.
Please see the attachment for the data tables required.© BrainMass Inc. brainmass.com June 4, 2020, 3:05 am ad1c9bdddf
This solution provides a sample analysis in Excel that determines the annual growth rate of a company in assets and an analysis of what the rates indicate. Additionally, this solution shows how to calculate the company's free cash flow (FCF).