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You are valuing a company that is projected to generate a free cash flow of $39...

You are valuing a company that is projected to generate a free cash flow of $39 million next year, growing at a stable 1.9% rate in perpetuity thereafter. The company has $34 million of debt and $6 million of cash. Cost of capital is 12.9%. There are 21 million shares outstanding. How much is each share worth according to your valuation analysis? Round to one decimal place.

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Answer #1

rate positively ..

Firstly we have to compute the value of firm
Value of firm = Free cash flow next year /(required rate - growth rate)
39/(12.9%-1.9%)
    354.55 million
Secondly, we have compute the equity value
Value of firm =     354.55 million
Less: Debt = -34 million
Add: Cash = 6 million
A Value of equity     326.55 million
B Number of share = 21 million
C=A/B Price per share =       15.55
Ans = $   15.55
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