Assume that today is December 31, 2019, and that the following information applies to Abner Airlines:
After-tax operating income [EBIT(1 - T)] for 2020 is expected to
be $700 million.
The depreciation expense for 2020 is expected to be $150
million.
The capital expenditures for 2020 are expected to be $450
million.
No change is expected in net operating working capital.
The free cash flow is expected to grow at a constant rate of 3% per
year.
The required return on equity is 13%.
The WACC is 9%.
The firm has $196 million of non-operating assets.
The market value of the company's debt is $5.642 billion.
130 million shares of stock are outstanding.
Using the corporate valuation model approach, what should be the company's stock price today? Do not round intermediate calculations. Round your answer to the nearest cent.
EBIT(1-t) = $700
Add: Depreciation Expense(non-cash) = $150 million
Less: Net Capital expenditure = $450
Change in Net operating working capital = $0 million
Free cash flow = $400 million
Value of firm is equal to the present value of all future free cash flows
= 400/(9%-3%)
= $6,666.67 million
Add: Non-operating assets = 196
Less: Value of Debt = $5,642 million
Value of Common Equity = $1,220.67 million
Number of shares = 130 million
Intrinsic value per share = $9.39
Assume that today is December 31, 2019, and that the following information applies to Abner Airlines:...
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