Mini case study: Temp Force Company
A. Describe briefly the legal rights and privileges of common stockholders.
B. What is free cash flow (FCF)? What is the weighted average cost of capital? What is the free cash flow valuation model?
C. Suppose the free cash flow at Time 1 is expected to grow at a constant rate of gL forever. If gL < WACC, what is a formula for the present value of excepted free cash flows when discounted at the WACC? If the most recent free cash flow is expected to grow at a constant rate of gL forever (and gL < WACC), what is a formula for the present value of expected free cash flows when discounted at the WACC?
D. Use B&M's data and the free cash flow flow valuation model to answer the following questions.
1. What is its estimated value of operations?
2. What is its estimated total corporate value? (This is the entity value).
3. What is its estimated intrinsic value of equity?
4. What is its estimated intrinsic stock price per share?