Stephens Stock Company (SSC) expects to generate free cash flows of $50 million, 60 million and...

Stephens Stock Company (SSC) expects to generate free cash flows of $50 million, 60 million and 65 million over the next three years after which SSC expects free cash flows to grow at 3% per year. SSC has a cost of capital of 15%, excess cash of $20 million and debt of $100 million. What is SSC’s enterprise value? If SSC has 20 million shares of stock outstanding, then what is the value of a share of SSC stock?

Expert Solution

value of the company

=50/(1+15%)^1+60/(1+15%)^2+65/(1+15%)^3+((65*(1+3%))/(15%-3%))/(1+15%)^3=498.4247 million

what is the value of a share of SSC stock

=(498.4247+20-100)/20=20.92

jeff jeffy answered 2 years ago

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