Our acquisition target is a privately held company in a growing industry. The target has recently borrowed $100 million to finance its expansion; it has no other debt or preferred stock. It pays no dividends and currently has no marketable securities. We expect the company to produce free cash flows of -$10 million in one year, $30 million in two years, and $36 million in three years. After three years, free cash flow will grow at a rate of 5%. Its WACC is 15% and it currently has 5 million shares of stock. Find price per share. Group of answer choices 37.24 42.33 28.96 32.74
Our acquisition target is a privately held company in a growing industry. The target has recently borrowed $100 million to finance its expansion; it has no other debt or preferred stock. It pays no dividends and currently has no marketable securities. We expect the company to produce free cash flows of -$10 million in one year, $30 million in two years, and $36 million in three years. After three years, free cash flow will grow at a rate of 5%. Its WACC is 15% and it currently has 5 million shares of stock. Find price per share. Group of answer choices 37.24 42.33 28.96 32.74
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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Our acquisition target is a privately held company in a growing industry. The target has recently borrowed $100 million to finance its expansion; it has no other debt or preferred stock . It pays no dividends and currently has no marketable securities. We expect the company to produce free cash flows of -$10 million in one year, $30 million in two years, and $36 million in three years. After three years, free cash flow will grow at a rate of 5%. Its WACC is 15% and it currently has 5 million shares of stock. Find price per share.
Group of answer choices
37.24
42.33
28.96
32.74
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