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Carter Technologies is expected to generate $150 million in free cash flow next year, and FCF...

Carter Technologies is expected to generate $150 million in free cash flow next year, and FCF is expected to grow at a constant rate of 7.5 percent per year indefinitely. Carter has no debt or preferred stock, and its weighted-average cost of capital is 11 percent. If Carter has 55 million shares of stock outstanding, what is the stock’s value per share?

a.

$86.49
b.

$83.77
c.

$72.49
d.

$77.92
e.

$42.86
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Answer #1

Current total value=Free cash flow for next period/(WACC-Growth rate)

=150/(0.11-0.075)

=$4285.71429 million

Hence stock value per share=Current total value/Shares of stock outstanding

=$4285.71429 million/55

=$77.92(Approx).

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