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Company A just reported free cash flows of $24 million and expects FCF to grow at a constant rate of 5% forever. The company has $100 million in cash, $200 million debt, $50 million preferred stock, and 10 million shares of common stock outstanding. Their cost of debt is 11% and they are located in a country with no corporate taxes. If the expected risk free rate is 2%, the expected return on the S&P 500 is 8%, and their beta is 1.5, what is the price of one share of Company A’s stock today?

Company A just reported free cash flows of $24 million and expects FCF to grow at a constant rate of 5% forever. The company has $100 million in cash, $200 million debt, $50 million preferred stock, and 10 million shares of common stock outstanding. Their cost of debt is 11% and they are located in a country with no corporate taxes. If the expected risk free rate is 2%, the expected return on the S&P 500 is 8%, and their beta is 1.5, what is the price of one share of Company A’s stock today?

Financial Management: Theory & Practice
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter14: Distributions To Shareholders: Dividends And Repurchases
Section: Chapter Questions
Problem 12P: Bayani Bakerys most recent FCF was 48 million; the FCF is expected to grow at a constant rate of 6%....
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Company A just reported free cash flows of $24 million and expects FCF to grow at a constant rate of 5% forever. The company has $100 million in cash, $200 million debt, $50 million preferred stock, and 10 million shares of common stock outstanding. Their cost of debt is 11% and they are located in a country with no corporate taxes. If the expected risk free rate is 2%, the expected return on the S&P 500 is 8%, and their beta is 1.5, what is the price of one share of Company A’s stock today?

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