Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Portage Bay Enterprises has $1 million in excess cash, no debt, and is expected to have free cash flow of
$13 million next year. Its FCF is then expected to grow at a rate of 4% per year forever. If Portage Bay's
equity cost of capital is 10% and it has 7 million shares outstanding, what should be the price of Portage Bay
stock?
***
The price of Portage Bay's stock is $
per share. (Round to the nearest cent)
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