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Scampini Technologies is expected to generate $125 million in free cash flow next year, and FCF is expected to grow at a consFarley Inc. has perpetual preferred stock outstanding that sells for $40 a share and pays a dividend of $2.25 at the end of e

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Answer #1

a.Total current value =FCF for next year/(WACC-Growth rate)
=125/(0.12-0.08)

=$3125 million

Hence value of stock per share=$3125 million/60 million shares

=$52.08(Approx).

b.Required rate of return=Annual dividend/Current value

=2.25/40

=5.63%(Approx).

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