Problem: You have been appointed as a consultant to Kulpa Fishing Supplies (KFS), a company that is seeking to increase its value. The company’s CEO and founder, Mia Kulpa, has asked you to estimation the value of two privately held companies the KFS is considering obtaining. But first, the senior management of KFS would like for you to describe how to value companies that don’t pay any dividends. You have structured your presentation around the subsequent items.
a. List out the two types of assets that company own.
b. What are the assets-in-place? How can their value be estimated?
c. What are the non-operating assets? How can their value be estimated?
d. What is total value of corporation? Who has claims on this value?
e. The first attainment target is a privately supposed company in the mature industry owned which is by two brothers, each with 5 million shares of stock. The company currently has free cash flow of $20 million. Its WACC is 11%, and the FCF is anticipated to grow at a stable rate of 5%. The company owns marketable securities of $100 million. It is financed with $200 million of debt, $50 million of preferred stock, and $210 million of book equity.
problem1. What is its value of operations?
problem2. What is its total corporate value?
problem3. What is its intrinsic value of equity?
problem4. What is its intrinsic stock price per share?
problem5. What is its intrinsic MVA (MVA = total corporate value – total book value of capital supplied by investors)?