Use the following information to value Badger-Meter Corp. using the discounted f

Question

Use the following information to value Badger-Meter Corp. using the discounted free cash flow model. The observed share price on December 1, 2017 was $45.75 per share. The most recent 10-k was dated Nov. 30, 2017.

Here are your working assumptions:

- The current share price is $56.00

- The most recent measure of Book Value of Equity per share is $16.00

- The cost of equity is 14%

- Return on equity is currently 74%

Value the shares as at Nov. 30, 2017 using the Discounted Free Cash Flow Model

Badger Meter (45.75) Total Revenue Net Income Interest Bearing Debt Retained Earnings Total Stockholder Equity Total Cash Flow From Operating Activities Capital Expenditures Dividends Paid Forecast Perp 2017 2018 2019 2020 2021 364,768 377,698393,761 29,678 25,93832,295 86,205 91,98690,51556,300 170,320.00 196,560.00 35,735 35,831 56,185 61,240 (12,332) (19,766) (10,596) (15,400) 10,633 11,261 12,461 14,600

Explanation / Answer

2018 2019 2020 2021 Total cash flow from operating activities 35735 35831 56185 61240 Capital Expenditures -12332 -19776 -10596 -15400 Free cash flow 23403 16055 45589 45840 Discounted factor @ 14% 0.877193 0.769468 0.674972 0.14 Present Value 20528.95 12353.8 30771.28 327428.6 391082.6 Present Value of discounted cash flow 391082.6 No of shares 196560/16 12285 Value of shares as on 30th Nov 2017 - 391082.60/12285 31.83416

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