A stock is expected to pay a dividend of $2.25 at the end of the year (i.e., D1 = $2.25), and it should continue to grow at a constant rate of 5% a year.

- A stock is expected to pay a dividend of $2.25 at the end of the year (i.e., D1 = $2.25), and it should continue to grow at a constant rate of 5% a year. If its required return is 15%, what is the stock's expected price 4 years from today?

- Assume that today is December 31, 2019, and that the following information applies to Abner Airlines:

After-tax operating income [EBIT(1 - T)] for 2020 is expected to be $450 million.
The depreciation expense for 2020 is expected to be $190 million.
The capital expenditures for 2020 are expected to be $225 million.
No change is expected in net operating working capital.
The free cash flow is expected to grow at a constant rate of 6% per year.
The required return on equity is 15%.
The WACC is 12%.
The firm has $206 million of non-operating assets.
The market value of the company's debt is $3.304 billion.
130 million shares of stock are outstanding.

Using the corporate valuation model approach, what should be the company's stock price today?

Expert Solution

jeff jeffy answered 2 years ago

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