River Enterprises has $501 million in debt and 23 million shares of equity outstanding. Its excess cash
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River Enterprises has $501 million in debt and 23 million shares of equity outstanding.
Its excess cash reserves are $13 million. They are expected to generate $198 million in free cash flows next year with a growth rate of 2% per year in perpetuity. River Enterprises’ cost of equity capital is 13%. After analyzing the company, you believe that the growth rate should be 3% instead of 2%. How much higher (in dollars) would the price per share of stock be if you are right?
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Related Book For
Fundamentals Of Corporate Finance
ISBN: 9781292437156
5th Global Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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