In: Finance
Assume today is December 31, 2013. Barrington Industries expects
that its 2014 after-tax operating income [EBIT(1 – T)] will be $450
million and its 2014 depreciation expense will be $70 million.
Barrington's 2014 gross capital expenditures are expected to be
$100 million and the change in its net operating working capital
for 2014 will be $20 million. The firm's free cash flow is expected
to grow at a constant rate of 4.5% annually. Assume that its free
cash flow occurs at the end of each year. The firm's weighted
average cost of capital is 9%; the market value of the company's
debt is $2.95 billion; and the company has 190 million shares of
common stock outstanding. The firm has no preferred stock on its
balance sheet and has no plans to use it for future capital
budgeting projects. Using the corporate valuation model, what
should be the company's stock price today (December 31, 2013)?
Round your answer to the nearest cent. Do not round intermediate
calculations.
$ per share?
Quantitative Problem 2: Hadley Inc. forecasts the year-end free cash flows (in millions) shown below.
Year | 1 | 2 | 3 | 4 | 5 |
FCF | -$22.04 | $38.1 | $43.5 | $51.2 | $56.7 |
The weighted average cost of capital is 12%, and the FCFs are
expected to continue growing at a 5% rate after Year 5. The firm
has $25 million of market-value debt, but it has no preferred stock
or any other outstanding claims. There are 19 million shares
outstanding. What is the value of the stock price today (Year 0)?
Round your answer to the nearest cent. Do not round intermediate
calculations.
$ per share?