It is 2022. You are investigating the possibility of making an equity investment in Walkerville Woodworking Inc., a firm that specializes in producing antique-style furniture with a modern twist. Your research has revealed the following information: Walkerville has $8 million in excess cash and $4.5 million in debt. The company is expected to have free cash flow of $28 million in 2023 and $35 million in 2024. Beyond 2024, free cash flow is expected to grow at a constant rate of 2% per year forever. • Walkerville's weighted average cost of capital (WACC) is 11% and it has 9 million shares outstanding. Question Ax What is the current enterprise value of Walkerville Woodworking given the above assumptions? 4 O A. $375.58 million OB. $349 14 million OC. $4141 million OD. $379.08 million OE. $340.86 million Question B What should be the price of one share of Walkerville stock?
It is 2022. You are investigating the possibility of making an equity investment in Walkerville Woodworking Inc., a firm that specializes in producing antique-style furniture with a modern twist. Your research has revealed the following information: Walkerville has $8 million in excess cash and $4.5 million in debt. The company is expected to have free cash flow of $28 million in 2023 and $35 million in 2024. Beyond 2024, free cash flow is expected to grow at a constant rate of 2% per year forever. • Walkerville's weighted average cost of capital (WACC) is 11% and it has 9 million shares outstanding. Question Ax What is the current enterprise value of Walkerville Woodworking given the above assumptions? 4 O A. $375.58 million OB. $349 14 million OC. $4141 million OD. $379.08 million OE. $340.86 million Question B What should be the price of one share of Walkerville stock?
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:(This question has two parts.)
It is 2022. You are investigating the possibility of making an equity investment in Walkerville Woodworking Inc., a firm that specializes in producing antique-style furniture with a modern twist. Your research has
revealed the following information:
• Walkerville has $8 million in excess cash and $4.5 million in debt.
• The company is expected to have free cash flow of $28 million in 2023 and $35 million in 2024.
• Beyond 2024, free cash flow is expected to grow at a constant rate of 2% per year forever.
• Walkerville's weighted average cost of capital (WACC) is 11% and it has 9 million shares outstanding.
Question Ax
What is the current enterprise value of Walkerville Woodworking given the above assumptions?
OA. $375.58 million
OB. $349 14 million
OC. $4141 million
OD. $379.08 million
OE. $340.86 million
Question B
What should be the price of one share of Walkerville stock?
OA. $46.40
OB. $41.34
OC. $42.12
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