You are valuing a company with free cash flows expected to grow at a stable 2.8% rate in perpetuity. Analysts are forecasting free cash flows of $16 million for next year (FCFF1). The company has $23 million of debt and $8 million of cash. Cost of capital is 10.6%. There are 23 million shares outstanding. How much is each share worth according to your valuation? Round to one decimal place.
rate positively ..
Value of the firm = Free cash flow next year/(reqiured rate - growth rate) | ||||||||
16/(10.6%-2.8%) | ||||||||
205.13 | million | |||||||
we also need to add the cash and reduce the debt value to arrive at value of eqiuty | ||||||||
Value of equity = | 205.13+8-23 | |||||||
190.13 | mil | |||||||
number of share = | 23 | mil | ||||||
Value of share = | $ 8.3 | per share | ||||||
190.13/23 | ||||||||
ans = | $ 8.3 | |||||||
You are valuing a company with free cash flows expected to grow at a stable 2.8%...
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