Shome Industries retains and reinvests all its earnings. So, Shome does not pay any dividends, and it

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Shome Industries retains and reinvests all its earnings. So, Shome does not pay any dividends, and it has no plans to pay dividends any time soon. A major pension fund is interested in purchasing Shome’s stock. The pension fund manager has estimated Shome’s free cash flows for the next 3 years as follows: $5 million, $9 million, and $12 million. After Year 3, free cash flow is projected to grow at a constant 4%. Shome’s WACC is 10%, the market value of its debt and preferred stock totals $27.2727 million, Shome has $10 million in nonoperating assets, and it has 5 million shares of common stock outstanding. What is an estimate of Shome’s stock price?

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Related Book For  answer-question

Fundamentals Of Financial Management

ISBN: 9780357517574

16th Edition

Authors: Eugene F. Brigham, Joel F. Houston

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