Year 1 2 3 4 5 Free Cash Flow 21 25 29 28 31
American Industries is expected to generate the above free cash flows over the next five years, after which free cash flows are expected to grow at a rate of 3% per year. If the discount rate is 13% and American Industries has cash of $23 million, debt of $32 million, and 78 million shares outstanding, what is American Industries' expected current share price?
value of the firm
=21/(1+13%)^1+25/(1+13%)^2+29/(1+13%)^3+28/(1+13%)^4+31/(1+13%)^5+((31*(1+3%))/(13%-3%))/(1+13%)^5
=265.56 million
American Industries' expected current share price
=(265.56-32+23)/78
=3.29
the above is answer..
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FCF ($ million)
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