Question

Review View Book1 - Excel Tell me what you want to do 5. File Home Insert Page Layout AX Cut Calibel .N Copy - Paste Format Painter B T U 10. Clipboard Font Formulat Data A * == A. DYMO Label Wap Test Merge & Center. General $. % . Conditional Format as Cell Formatting Table Styles Styles Insert Dela - - N66 65 66 Answer: 69 2. Lance Inc.'s free cash flow was just $1.00 million. If the expected long-run growth rate for this company is 54%, if the weighted average cost of capital is 11.45 Lance has 54 70 million in short-term investments and $3 million in debt, and 1 million shares outstanding, what is the intrinsic stock price? $17.28 b. 517.70 c. $18.13 d. 51857 $19.01

Answer 1

FCF of the company = $ 1 M

Long run growth of the company(g) = 5.4%

WACC = 11.4%

Value of the firm = FCF*(1+g)/(k-g) = 1*(1+5.4%)/(11.4% - 5.4%) = $ 17.57 M

MV of shares = Firm value - Debt + Short term investments = 17.57 - 3 + 4 = 18.57 M

Price per share = 18.57 M/1M = $ 18.57

Answer is D)