andrwisawesome0
21.04.2020 •
Business
Lockeran Co. has the following projected sales, costs, net investment and free cash flows in millions. The anticipated growth rate in free cash flows after year 6 is 3% per year forever. there are 3 million shares outstanding and investors require a return of 8% on the company's stock. Using the constant growth model to find the terminal value, calculate the price of the company's stock.
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Ответ:
$278.75 per stock
Explanation:
FCF1 = $31.17 million
FCF2 = $35.54 million
FCF3 = $39.80 million
FCF4 = $43.78 million
FCF5 = $47.27 million
FCF6 = $50.11 million
since the FCF6 will grow at a constant 3% rate forever, then we can use the constant growth model to determine the price of the company at year 6, then we must discount it along with the rest of the cash flows:
company's value = ($50.11 x 1.03) / (8% - 3%) = $1,032.27 million
now we can discount the FCFs:
$31.17/1.08 + $35.54/1.08² + $39.80/1.08³ + $43.78/1.08⁴ + $47.27/1.08⁵ + $50.11/1.08⁶ + $1,032.27/1.08⁶ = $28.86 + $29.37 + $31.59 + $32.18 + $32.17 + $31.58 + $650.51 = $836.26 million
price per stock = $836.26 million / 3 million stocks = $278.75 per stock
Ответ: