A company had free cash flows of $788 million last year. Free cash flows are expected to grow at 3.5% per year. The WACC for thefirm is 11.8%. They currently have $4.4 billion in debt outstanding, and have 233 million common stock outstanding. The companyhas 50 million preferred stock outstanding, that currently trade at $53.What is the estimate of the stock price based on the firm valuation model?Add your answer

Free cash flow method is used to calculate the profitability of the firm by valuating overall health…

Answered: A company had free cash flows of $788…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Company Z just paid a dividend of D0 = $1.30. Analysts expect the company's dividend to grow by 20% this year, by 10% in Year 2, and at a constant rate of 4% in Year 3 and thereafter. The required return on this stock is 9%. What is the best estimate of the stock's current market value? Group of answer choices 35.69 37.86 36.21 32.92 31.27
XYZ Corporation's beta is calculated 1.20. The corporation paid $1.25 dividend last year. The growth rate in XYZ's earnings and dividends is estimated 25.00% for the next 5 years, after which the growth rate will be 2.00%. The risk-free rate of return is 3.00%, and XYZ's management estimates that the market return is 8.50%. Calculate the current common stock price of the corporation.
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