Assume that today is December 31, 2015, and the following information applies to Vermeil Airlines: • After-tax operating income [EBIT(1 T), also called NOPAT] for 2016 is expected to be $500 million. • The depreciation expense for 2016 is expected to be $100 million. • The capital expenditures for 2016 are expected to be $200 million. • No change is expected in net operating working capital. • The free cash flow is expected to grow at a constant rate of 6 percent per year. • The required return on equity is 15 percent. • The WACC is 12 percent. • The market value of the company’s debt is $3.2 billion. • 200 million shares of stock are outstanding. Using the free cash flow approach, what should the company’s stock price be today?
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Assume that today is December 31, 2015, and the following information applies to Vermeil Airlines:
• After-tax operating income [EBIT(1 T), also called
• The
• The capital expenditures for 2016 are expected to be $200 million.
• No change is expected in net operating working capital.
• The
• The required
• The WACC is 12 percent.
• The market value of the company’s debt is $3.2 billion.
• 200 million shares of stock are outstanding.
Using the free cash flow approach, what should the company’s stock price be today?
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