Assume that today is December 31, 2021, and that the following information applies to AbnerAirlines:After-tax operating income [EBIT(1 - T)] for 2022 is expected to be $550 million.• The depreciation expense for 2022 is expected to be $200 million.The capital expenditures for 2022 are expected to be $250 million.• No change is expected in net operating working capital.• The free cash flow is expected to grow at a constant rate of 6% per year.• The required return on equity is 15%.• The WACC is 9%.• The firm has $210 million of nonoperating assets.• The market value of the company's debt is $3.727 billion.• 260 million shares of stock are outstanding.Using the corporate valuation model approach, what should be the company's stock price today?Do not round intermediate calculations. Round your answer to the nearest cent.

Stock Price can be found out by dividing the value of equity with Outstanding Stock. Value of equity…

Answered: Assume that today is December 31, 2021,…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter21: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 9P

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Assume that today is December 31, 2021, and that the following information applies to Abner Airlines: After-tax operating income [EBIT(1 - T)] for 2022 is expected to be $600 million. The depreciation expense for 2022 is expected to be $90 million. The capital expenditures for 2022 are expected to be $250 million. No change is expected in net operating working capital. The free cash flow is expected to grow at a constant rate of 5% per year. The required return on equity is 15%. The WACC is 9%. The firm has $193 million of nonoperating assets. The market value of the company's debt is $2.918 billion. 230 million shares of stock are outstanding. Using the corporate valuation model approach, what should be the company's stock price today? Do not round intermediate calculations. Round your answer to the nearest cent.
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