A company is forecasted to generate free cash flows of $25 million next year and $27 million the year after. After that, cash flows are projected to grow at a stable rate in perpetuity. The company's cost of capital is 8.1%. The company has $31 million in debt, $16 million of cash, and 16 million shares outstanding. Using an exit multiple for the company's free cash flows (EV/FCFF) of 20, what's your estimate of the company's stock price? O a. 30.8 O b. 26.8 O c. 14.9 O d. 10.6 Oe. 18.0
A company is forecasted to generate free cash flows of $25 million next year and $27 million the year after. After that, cash flows are projected to grow at a stable rate in perpetuity. The company's cost of capital is 8.1%. The company has $31 million in debt, $16 million of cash, and 16 million shares outstanding. Using an exit multiple for the company's free cash flows (EV/FCFF) of 20, what's your estimate of the company's stock price? O a. 30.8 O b. 26.8 O c. 14.9 O d. 10.6 Oe. 18.0
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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Transcribed Image Text:QUESTION 18
A company is forecasted to generate free cash flows of $25 million next year and $27 million the year after. After that, cash flows are projected to
grow at a stable rate in perpetuity. The company's cost of capital is 8.1%. The company has $31 million in debt, $16 million of cash, and 16 million
shares outstanding. Using an exit multiple for the company's free cash flows (EV/FCFF) of 20, what's your estimate of the company's stock price?
O a. 30.8
O b. 26.8
O c. 14.9
O d. 10.6
O e. 18.0
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