Hadley Inc. forecasts the year-end free cash flows (in millions) shown below. Year 1 2 3 4 5 FCF -$22.32 $37.5 $43.5 $51.1 $56.6 The weighted average cost of capital is 9%, and the FCFs are expected to continue growing at a 4% rate after Year 5. The firm has $26 million of market-value debt, but it has no preferred stock or any other outstanding claims. There are 20 million shares outstanding. Also, the firm has zero non-operating assets. What is the value of the stock price today (Year 0)? Round your answer to the nearest cent. Do not round intermediate calculations.
Hadley Inc.
| Year | 1 | 2 | 3 | 4 | 5 |
| FCF | -$22.32 | $37.5 | $43.5 | $51.1 | $56.6 |
The weighted average cost of capital is 9%, and the FCFs are expected to continue growing at a 4% rate after Year 5. The firm has $26 million of market-value debt, but it has no
Present value in simple word means current value of future sum of money. It is used as tool in many businesses to find out present value of future cash flows. Business like landing of loans, assets, banking industry etc. uses this technique in many ways.
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