Assume that today is December 31, 2021. Use the following information that applies to Harrison Corporation to calculate what should be the company’s stock price today.After-tax operating income [EBIT (1 – T)] for 2022 is expected to be $850 millionThe depreciation expense for 2022 is expected to be $110 millionThe capital expenditures for 2022 are expected to be $650 millionNo change is expected in net working capitalThe free cash flow is expected to grow at a constant rate of 5.5% per yearThe required return on equity is 10%The WACC is 8%The firm has $150 million of non-operating assetsThe market value of the company’s debt is $3.25 billion250 million shares of stock are outstandingUsing the corporate valuation model approach, what should be the company’s stock price today?

The process of determining a business entity's value is known as corporate valuation. It's a key…

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Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter2: Financial Statements, Cash Flow,and Taxes

Section: Chapter Questions

Problem 21SP: Begin with the partial model in the file Ch02 P21 Build a Model.xlsx on the textbooks Web site. a....

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Assume that today is December 31, 2021. Use the following information that applies to Harrison Corporation to calculate what should be the company’s stock price today.

After-tax operating income [EBIT (1 – T)] for 2022 is expected to be $850 million
The depreciation expense for 2022 is expected to be $110 million
The capital expenditures for 2022 are expected to be $650 million
No change is expected in net working capital
The free cash flow is expected to grow at a constant rate of 5.5% per year
The required return on equity is 10%
The WACC is 8%
The firm has $150 million of non-operating assets
The market value of the company’s debt is $3.25 billion
250 million shares of stock are outstanding

Using the corporate valuation model approach, what should be the company’s stock price today?

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