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.
These solutions may offer step-by-step problem-solving explanations or good writing examples that include modern styles of formatting and construction of bibliographies out of text citations and references. Students may use these solutions for personal skill-building and practice. Unethical use is strictly forbidden.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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