This case is focused on the valuation of the stock of a company con...

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This case is focused on the valuation of the stock of a company considering repurchasing its own shares. Using information in the case, especially the forecasting assumptions from Exhibit 8, estimate the company’s implied value and per share value by applying the discounted cash flow (DCF) method. You will need to first prepare a projection of free cash flows. Using the forecasting assumptions, create a projection of cashflows - Specific line items that should be included in the cash flow projection should include EBIT, Net Working Capital, and Fixed Assets. Add other line items as needed to get to free cashflows. (Hint: Free Cash Flows = NOPAT – Change in NWC – Capital Expenditures. NOPAT = EBIT less 39% marginal taxes.) Then perform DCF on the projected cashflows. Based on your valuation technique, and facts within the case, make a recommendation whether American Greetings should repurchase their shares and support your position.
Perform the analysis described in the “Case Specifics” above and prepare a 3 to 5 page write-up commenting on your analysis and responding to the specifics posed. Refer to general case guidelines posted on canvas for guidance on how to write a case.

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This report presents a DCF valuation of the stock of American Greetings (“AG”, the “Company”). AG’s share price has lost 50% in value over the previous several months to a year-end closing price of $12.51, thus the management of the company is considering going into the market with a $75 million repurchase program. The purpose of the analysis is to estimate the implied value and per share value of the company to enable the company’s management make a decision regarding the share repurchase program being considered. The analysis begins with an estimation of AG’s WACC based on the metrics contained in the company’s financial statements followed by an estimation of FCFF and stock value per share.
The WACC analysis established that AG has a discount rate of 10% based on an 11.915% cost of debt and an 11.765% cost of equity. Consequently, using this discount rate along with the projected FCFF values it is estimated that the company’s implied value and per share value is higher than the current price the stock is trading for, thus...

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