HomeworkLib
Question

A company is projected to have a free cash flow of $314 million next year, growing...

A company is projected to have a free cash flow of $314 million next year, growing at a 5.9% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.1%. The company's cost of capital is 13.6%. The company owes $57 million to lenders and has $19 million in cash. If it has 207 million shares outstanding, what is your estimate for its stock price? Round to one decimal place.

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1
Year Growth rate Free cash flow computation Free cashflow PV factor @13.6% Free cashflow * PV factor
1 $      314.00            0.8803 $       276.41
2 5.90% 314*(1+5.9%) $      332.53            0.7749 $       257.67
3 5.90% 332.526*(1+5.9%) $      352.15            0.6821 $       240.21
3 $   3,126.44            0.6821 $   2,132.62
Share price= $   2,906.91
Current Free cashflow $        352.15
Rate of return 13.60%
Growth Rate 2.10%
Share Price as per Free cashflow at Y3 =Current Free cashflow*(1+Growth rate)/(Rate of return-Growth Rate)
Share Price as per Free cashflow at Y3 =352.145034*(1+0.021)/(0.136-0.021)
Share Price as per Free cashflow at Y3 $     3,126.44
Firm value at Y0 $     2,906.91
Cash $          19.00
Value of debt $         (57.00)
Value of equity $     2,868.91
No of shares            207.00
Share price= 2868.91/207
Share price= $          13.86
0 0
Add a comment
Know the answer?
Add Answer to:
A company is projected to have a free cash flow of $314 million next year, growing...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • A company is projected to generate free cash flows of $314 million next year, growing at...

    A company is projected to generate free cash flows of $314 million next year, growing at a 5.9% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.1%. The company's cost of capital is 13.6%. The company owes $161 million to lenders and has $39 million in cash. If it has 107 million shares outstanding, what is your estimate for its stock price? Round to one decimal place.

  • A company is projected to have a free cash flow of $243 million next year, growing...

    A company is projected to have a free cash flow of $243 million next year, growing at a 5.6% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.1%. The company's cost of capital is 12.7%. The company owes $71 million to lenders and has $17 million in cash. If it has 221 million shares outstanding, what is your estimate for its stock price? Round to one decimal place.

  • A company is projected to have a free cash flow of $443 million next year, growing...

    A company is projected to have a free cash flow of $443 million next year, growing at a 4.6% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.7%. The company's cost of capital is 10.4%. The company owes $121 million to lenders and has $9 million in cash. If it has 271 million shares outstanding, what is your estimate for its stock price? Round to one decimal place.

  • A company is projected to have a free cash flow of $336 million next year, growing...

    A company is projected to have a free cash flow of $336 million next year, growing at a 6% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.3% in perpetuity. The company's cost of capital is 9.7%. The company owes $89 million to lenders and has $18 million in cash. If it has 186 million shares outstanding, what is your estimate for its stock price? Round to one...

  • A company is projected to generate free cash flows of $329 million next year, growing at...

    A company is projected to generate free cash flows of $329 million next year, growing at a 5.7% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.1%. The company's cost of capital is 13.3%. The company owes $171 million to lenders and has $37 million in cash. If it has 114 million shares outstanding, what is your estimate for its stock price? Round to one decimal place.

  • A company is projected to generate free cash flows of $429 million next year, growing at...

    A company is projected to generate free cash flows of $429 million next year, growing at a 4.7% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.6%. The company's cost of capital is 10.8%. The company owes $246 million to lenders and has $27 million in cash. If it has 164 million shares outstanding, what is your estimate for its stock price? Round to one decimal place.

  • A company is projected to generate free cash flows of $443 million next year, growing at...

    A company is projected to generate free cash flows of $443 million next year, growing at a 4.6% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.7%. The company's cost of capital is 10.4%. The company owes $257 million to lenders and has $26 million in cash. If it has 171 million shares outstanding, what is your estimate for its stock price? Round to one decimal place.

  • Question 10 Homework • Unanswered A company is projected to generate free cash flows of $414...

    Question 10 Homework • Unanswered A company is projected to generate free cash flows of $414 million next year, growing at a 4.9% rate until the end of year 3. After that, cash flows are expected to grow at a stable rate of 2.6%. The company's cost of capital is 11.1%. The company owes $236 million to lenders and has $29 million in cash. If it has 157 million shares outstanding, what is your estimate for its stock price? Round...

  • A company is projected to generate free cash flows of $643 million per year for the...

    A company is projected to generate free cash flows of $643 million per year for the next 3 years (FCFF1, FCFF2 and FCFF3). Thereafter, the cash flows are expected to grow at a 2.7% rate in perpetuity. The company's cost of capital is 8.1%. The company owes $179 million to lenders and has $59 million in cash. If it has 189 million shares outstanding, what is your estimate for its stock price? Round to one decimal place.

  • A company is projected to generate free cash flows of $800 million per year for the...

    A company is projected to generate free cash flows of $800 million per year for the next 3 years (FCFF1, FCFF2 and FCFF3). Thereafter, the cash flows are expected to grow at a 1.5% rate in perpetuity. The company's cost of capital is 12.0%. The company owes $100 million to lenders and has $90 million in cash. If it has 150 million shares outstanding, what is your estimate for its stock price? Round to one decimal place.

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT