At the beginning of its fiscal year 2006, an analyst made the following forecast for General Mills Inc., the consumer foods company for 2006-2009 (in millions of dollars): 2006 2007 2008 2009 Cash flow from operations $2,014 $2,057 $2,095 $2,107 Cash flow in operations 300 380 442 470 General Mills reported $6,192 million in short-term and long-term debt at the end of 2005 but very little in interest-bearing debt assets. Use a required return of 9 per cent to calculate both the enterprise value and equity value for General Mills at the beginning of 2006 under two forecasts for long-run cash flows: a) Free cash flow will remain at 2009 levels after 2009. b) Free cash flow will grow at 3 per cent per year after 2009. General Mills had 369 million shares outstanding at the end of 2005, trading at $47 per share. Calculate value per share and a value-to-price ratio under both scenarios
At the beginning of its fiscal year 2006, an analyst made the following
| 2006 | 2007 | 2008 | 2009 | |
|---|---|---|---|---|
| Cash flow from operations | $2,014 | $2,057 | $2,095 | $2,107 |
| Cash flow in operations | 300 | 380 | 442 | 470 |
General Mills reported $6,192 million in short-term and long-term debt at the end of 2005 but very little in interest-bearing debt assets. Use a required return of 9 per cent to calculate both the enterprise value and equity value for General Mills at the beginning of 2006 under two forecasts for long-run
a)
b) Free cash flow will grow at 3 per cent per year after 2009.
General Mills had 369 million shares outstanding at the end of 2005, trading at $47 per share. Calculate value per share and a value-to-price ratio under both scenarios.
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