Heavy metal finance question

 

Heavy Metal Corporation is expected to generate the following free cash flows over the next five years:

Year

1

2

3

4

5

FCF ($ millions)

53

68

78

75

82

After then, the free cash flows are expected to grow at the industry average of 4% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14%:

  • a. Estimate the enterprise value of Heavy Metal.
  • b. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimate its share price.
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