You are trying to value the stock of MicroTrans Inc

Finance Oct 21, 2020

You are trying to value the stock of MicroTrans Inc. using a free cash flow model. The firm currently has 25 million shares outstanding, a market value of debt of $250 million and $60 million in excess cash. You have estimated the free cash flows for the next few years as shown in the table below. You also assume that free cash flows will grow at a rate of 1.5% each year after year 3 (in perpetuity). The weighted average cost of capital (WACC) is 12%. Given this information, what is the best estimate for the share price of MicroTrans?

Free Cash Flow Forecasts (in $-million)

Year 1 2 3

Free Cash Flow (in $-million) 100 110 115

Expert Solution

Share price = $34.40

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