John Adam, an analyst with T.D. Wyse Securities, is trying to evaluate Company A’s target stock price per share. Free cash flow (FCF) estimates for the next 3 years are -$2, $12, and $18 million, after which the FCF is expected to grow at 4%. The overall firm cost of capital is 10%. The firm has $40 million in debt and has 16 million shares of stock. What is the estimated value per share? Show your calculations.

John Adam, an analyst with T.D. Wyse Securities, is trying to evaluate Company A’s target stock price per share. Free cash flow (FCF) estimates for the next 3 years are -$2, $12, and $18 million, after which the FCF is expected to grow at 4%. The overall firm cost of capital is 10%. The firm has $40 million in debt and has 16 million shares of stock. What is the estimated value per share? Show your calculations.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 27P

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