Today is December 31, 2018. The following information applies to Addison Airlines: · After-tax, operating income for the year 2019 is expected to be P400 million. · The company’s depreciation expense for the year 2019 is expected to be P80 million. · The company’s capital expenditures for the year 2019 are expected to be P160 million. · No change is expected in the company’s net operating working capital. · The company’s free cash flow is expected to grow at a constant rate of 5 percent per year. · The company’s cost of equity is 14 percent. · The company’s WACC is 10 percent. · The current market value of the company’s debt is P1.4 billion. · The company currently has 125 million shares of stock outstanding. Using the free cash flow valuation method, what should be the company’s stock price today?

Today is December 31, 2018. The following information applies to Addison Airlines: · After-tax, operating income for the year 2019 is expected to be P400 million. · The company’s depreciation expense for the year 2019 is expected to be P80 million. · The company’s capital expenditures for the year 2019 are expected to be P160 million. · No change is expected in the company’s net operating working capital. · The company’s free cash flow is expected to grow at a constant rate of 5 percent per year. · The company’s cost of equity is 14 percent. · The company’s WACC is 10 percent. · The current market value of the company’s debt is P1.4 billion. · The company currently has 125 million shares of stock outstanding. Using the free cash flow valuation method, what should be the company’s stock price today?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 12P

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Today is December 31, 2018. The following information applies to Addison Airlines: After-tax, operating income for the year 2019 is expected to be P400 million. The company's depreciation expense for the year 2019 is expected to be P80 million. The company's capital expenditures for the year 2019 are expected to be P160 million. No change is expected in the company's net operating working capital. The company's free cash flow is expected to grow at a constant rate of 5 percent per year. The company's cost of equity is 14 percent. The company's WACC is 10 percent. The current market value of the company's debt is P1.4 billion. The company currently has 125 million shares of stock outstanding. Using the free cash flow valuation method, what should be the company's stock price today? O P25 O P40 O P50 O P85
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