Answered: What is the total value of The Haus of…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 6MC

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The Haus of Us embarks on an aggressive expansion that requires additional capital and halting dividend payments to increase retained earnings. Based on the latest financial statements of the company, you were able to compute the free cash flow of P25 million. You project that for the next 2 years. This free cash flow will have an annual growth of 25% and 20% annual growth rate for the last 3 years, then it will maintain its normal growth rate of 8% to infinity.

The weighted cost of capital for this project would be 13.5%. The market value of all long term debts totaled P200 million and Preferred Stock valued at 100 million. The company has 10 million shares outstanding common stock.

What is the total value of The Haus of Us?
What is the price per share of common stock?

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