Scampini Technologies is expected to generate $200 million in free cash flow next year, and FCF...

Scampini Technologies is expected to generate $200 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 11%. If Scampini has 35 million shares of stock outstanding, what is the stock's value per share? Do not round intermediate calculations. Round your answer to the nearest cent.

Each share of common stock is worth $ , according to the corporate valuation model.

Expert Solution

The company doesn't have debt or preferred share, so, the free cash flows will belong to the shareholders as they are the owners of the company.

Using Discounted cash flow method

So, Terminal Value = Free cash flow for next year /( WACC - growth rate)

= 200 / ( 11% -6%)

= 200 / 5%

= 4000 Millions

Share Price = Terminal Value / Number of shares

= 4000 Millions / 35 Millions

= $114.285714286

Share Price = $114.285714286

jeff jeffy answered 2 years ago

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