Stetson Building Supplies' last free cash flow was $1.85 million. Its free cash flow growth rate...
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Stetson Building Supplies' last free cash flow was $1.85 million. Its free cash flow growth rate is expected to be at 25% for year 1 and 12% for Year 2, after which free cash flows are expected to grow at a rate of 6% forever. Its weighted average cost of capital WACC (or r) is 12%. Stetson has $5 million in short-term investments and $7 million in debt and has 2 million shares outstanding. What is the best estimate of the current intrinsic stock price? (8 points) Stetson Building Supplies' last free cash flow was $1.85 million. Its free cash flow growth rate is expected to be at 25% for year 1 and 12% for Year 2, after which free cash flows are expected to grow at a rate of 6% forever. Its weighted average cost of capital WACC (or r) is 12%. Stetson has $5 million in short-term investments and $7 million in debt and has 2 million shares outstanding. What is the best estimate of the current intrinsic stock price? (8 points)
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Answer rating: 100% (QA)
Intrinsic value Present Value of future Free Cash Flows Year 1 185112 208 million Year 2 20... View the full answer
Related Book For
Financial Reporting and Analysis Using Financial Accounting Information
ISBN: 978-1439080603
12th Edition
Authors: Charles H Gibson
Posted Date:
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