QUESTION 2 Consider a company that is forecasted to generate free cash flows of $24 million next year and $29 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 7.5%. The company has $34 million in debt, $19 million of cash, and 22 million shares outstanding. Using an exit multiple for the company's free cash flows (EV/FCFF) of 15, how much is each share worth? Round to one decimal place.
QUESTION 2 Consider a company that is forecasted to generate free cash flows of $24 million next year and $29 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 7.5%. The company has $34 million in debt, $19 million of cash, and 22 million shares outstanding. Using an exit multiple for the company's free cash flows (EV/FCFF) of 15, how much is each share worth? Round to one decimal place.
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
Related questions
Question
Transcribed Image Text:QUESTION 2
Consider a company that is forecasted to generate free cash flows of $24 million next year
and $29 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 7.5%. The company has $34 million in debt,
$19 million of cash, and 22 million shares outstanding. Using an exit multiple for the
company's free cash flows (EV/FCFF) of 15, how much is each share worth? Round to
one decimal place.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education