What is the value of operations and current value of the stock?
May 23, 2010 - 5:29 am
Free cash flow $2 million
Growth 5%
Beta 1.4
what is the value of operations?
If $10.82 million is in debt what’s the current value?
idk
Free cash flow $2 million
Growth 5%
Beta 1.4
what is the value of operations?
If $10.82 million is in debt what’s the current value?
idk
May 23rd, 2010 at 10:41 am
idk
References :
May 23rd, 2010 at 11:24 am
You need to have a Risk Free Rate assumption (usually US Treasury Yield of 10 or 20 years) and a Market Risk Premium. Then, you can apply CAPM. The fact you supplied a Beta makes me think this. CAPM = Risk Free Rate + Beta*(Risk Premium)
You kind of have a mix of data here.
If you just want to value the growing FCF, you can do that in perpetuity.
It would be $2MM/0.05 = $40MM. (That assumes you are growing the free cash flow of $2MM by 5% forever)
You can subtract the debt for the current value, since the FCF is the whole enterprise value.
References :
MBA in Finance and Economics