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Corporate Valuation Model

Use the Corporate Value model and the following data to calculate a firm's total intrinsic (current) value and intrinsic value per share:

1st yr: PBT = $1 million; Net capital investment = $200,000
2nd yr: PBT = $1.2 million; Net capital investment = $250,000
3rd yr: PBT = $1.3 million; Net capital investment - $125,000

Tax rate = $40% for all three years
WACC (k) = 10%

After the first three years, long run constant g fcf = 5%
Debt = $2 million
There are 500,000 shares outstanding

Also, show formulas and entries on financial calculator.

Solution Preview

Use the Corporate Value model and the following data to calculate a firm's total intrinsic (current) value and intrinsic value per share:

1st yr: PBT = $1 million; Net capital investment = $200,000
2nd yr: PBT = $1.2 million; Net capital investment = $250,000
3rd yr: PBT = $1.3 million; Net capital investment - $125,000

Tax rate = $40% for all three years
WACC (k) = 10%

After the first three years, long run constant g ...

Solution Summary

This explains the steps to compute the corporate value with the help of example.

$2.19