National Corporation expects to generate free-cash flows of P300,000 per year for the next five years. Beyond that time, free cash flows are expected to grow at a constant rate of 5 percent per year forever. If the firm's average cost of capital is 15 percent, the market value of the firm's debt is P500,000, and National Corporation has a half million shares of stock outstanding, what is the value of National Corporation's stock?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter15: Dividend Policy
Section: Chapter Questions
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National Corporation expects to generate free-cash flows of P300,000 per year for the next five years. Beyond that time, free cash flows are expected to grow at a constant rate of 5 percent per year forever. If the firm's average cost of capital is 15 percent, the market value of the firm's debt is P500,000, and National Corporation has a half million shares of stock outstanding, what is the value of National Corporation's stock? Format: 1.11

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