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    FCFE per share / Current Value

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    Abbey Naylor, CFA, has been directed by Carroll to determine the value of Sundanci's stock using the free cash flow to equity model. Naylor believes that Sundanci's FCFE will grow at 27 percent for two years and 13 percent thereafter. Capital expeditures, depreciation, and working capital are all expected to increase proportionately with FCFE.

    a) Calculate the amount of FCFE per share for the year 2000 using the data below.

    INCOME STATEMENT: 1999 2000
    Revenue $474 $598
    Depreciation 20 23
    Other Operating Costs 368 460
    Income Before Taxes 86 115
    Taxes 26 35
    Net Income 60 80
    Dividends 18 24
    EPS $0.714 $0.952
    Dividend Per Share $0.214 $0.286
    Common Shares Outstanding 84mil 84mil

    BALENCE SHEET:
    Current Assets $201 $326
    Net, PPE 474 489
    Total Assets 675 815
    Current Liabilities 57 141
    Long-term Debt 0 0
    Total Liabilities 57 141
    Shareolders Equity 618 674
    Total liab. & Equity 675 815
    Capital Expenditures 34 38

    b) Calculate the current value of a share of Sundanci stock based on the two-stage FCFE model. Show work.

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    Solution Preview

    FCFE per share / Current Value
    Abbey Naylor, CFA, has been directed by Carroll to determine the value of Sundanci's stock using the free cash flow to equity model. Naylor believes that Sundanci's FCFE will grow at 27 percent for two years and 13 percent thereafter. Capital expenditures, depreciation, and working capital are all expected to increase proportionately with FCFE.

    a) Calculate the amount of FCFE per share for the year 2000 using the data below.

    INCOME STATEMENT: 1999 2000
    Revenue $474 $598
    Depreciation 20 23
    Other Operating Costs ...

    $2.19

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