23.07.2022 - 12:53

# IDX Technologies is a privately-held developer of advanced security systems based in Chicago. As part of your business development strategy, in late 2013 you initiate discussions with IDX’s founder about the possibility of acquiring the business at the en

Question:

IDX Technologies is a privately-held developer of advanced security systems based in Chicago. As part of your business development strategy, in late 2013 you initiate discussions with IDX’s founder about the possibility of acquiring the business at the end of 2013.

Estimate the value of IDX per share using a discounted FCF approach and the following data:

Debt: $37 million Excess cash:$116 million

Shares outstanding: 50 million

Expected FCF In 2014: $42 million Expected FCF in 2015:$51 million

Future FCF growth rate beyond 2015: 6%

Weighted-average cost of capital: 9.4%

The terminal enterprise value in 2014 is $__________ million. The enterprise value in 2013 is$__________ million.

The equity value is $__________ million. The value of IDX per share is$__________.

The terminal enterprise value in 2014 is $846.47 million. This is calculated by using the discounted FCF approach, where the terminal value equals (FCF for the next period ? (WACC - Expected FCF growth rate)). So, in this case, the calculation would be ((51 ? (0.094 - 0.06)) ? (1 + 0.094)^1) =$846.47 million. The enterprise value in 2013 is $924.47 million. This is calculated by adding the value of the Excess cash ($116 million) to the market value of the shares ($846.47 million). The equity value is$887.47 million. This is calculated by subtracting the value of the Debt ($37 million) from the enterprise value in 2013 ($924.47 million). The value of IDX per share is $17.75. This is calculated by dividing the equity value ($887.47 million) by the number of shares outstanding (50 million). So, $887.47 million ? 50 million =$17.75 per share.