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Homework answers / question archive / According to the value-based management model, what is the stock price per share given the following:   Year           1 Revenue   725

According to the value-based management model, what is the stock price per share given the following:   Year           1 Revenue   725

Finance

According to the value-based management model, what is the stock price per share given the following:

 

Year           1

Revenue   725.00

Fixed Costs 90.00

Variable Costs  280.00

Additional investment in NWC 3.00

Additional investment in operating long-term assets   80.00

Depreciation          75.00

Tax Rate  0.40

 

The free cash flow is expected to grow at 8% per year from year 1 to year 5 and 6% per year after year 5 to infinity.

WACCcomp = 20%

Market Value of the firm:

 

                                                                             Price Per Share                      #of Shares                            Market Value

Long term debt                                                                                                                                                     700.00

Preferred stock                                                       7.00                                       10                                          70.00

Common Stock, equity                                             15.00                                     100                                        1,500.00

Total                                                                                                                                                                       2,270.00

Market value of non-operating short term assets=50

Market value of non-operating long term assets=80

 

a. $5.68

b. $7.22

c. $9.97

d. $6.90

e. $8.54

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