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9. Free cash flow valuation of stock.ALD Inc. is a growing firm with free cash flows increasing by 15 percent for the first two years and 10 percent for the next three years. After that period, the rate of growth of the cash flows will stabilize at 5 percent annually for the foreseeable future. Last year the cash flows were $11.2 million. The company has $40 million cash on its balance sheet and $100 million debt. Estimate the stock price if there are 100 million outstanding shares. The average cost of capital for the firm is 8 percent.

9. Free cash flow valuation of stock.ALD Inc. is a growing firm with free cash flows increasing by 15 percent for the first two years and 10 percent for the next three years. After that period, the rate of growth of the cash flows will stabilize at 5 percent annually for the foreseeable future. Last year the cash flows were $11.2 million. The company has $40 million cash on its balance sheet and $100 million debt. Estimate the stock price if there are 100 million outstanding shares. The average cost of capital for the firm is 8 percent.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 4P
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9. Free cash flow valuation of stock.ALD Inc. is a growing firm with free cash flows increasing by 15 percent for the first two years and 10 percent for the next three years. After that period, the rate of growth of the cash flows will stabilize at 5 percent annually for the foreseeable future. Last year the cash flows were $11.2 million. The company has $40 million cash on its balance sheet and $100 million debt. Estimate the stock price if there are 100 million outstanding shares. The average cost of capital for the firm is 8 percent. 

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