Answered: Firm has 120,000 outstanding shares,…

Firm has 120,000 outstanding shares, growth rate of 3.6%, with 648,200 in Free Cash Flow and a reuired rate of return of 12%. What is the value of a share of firm's stock?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 5P

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Question

Firm has 120,000 outstanding shares, growth rate of 3.6%, with 648,200 in Free Cash Flow and a reuired rate of return of 12%. What is the value of a share of firm's stock?

Definition Definition Cash that is left over after a company has paid for its operating and capital expenses. Unlike net income or earnings, free cash flow excludes non-cash expenses of the income statement and includes the expenditures on equipment and assets. Free cash flow also helps potential shareholders to evaluate how quickly the company can pay interest and dividends.

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