Assume that today is December 31, 2018, and that the following information applies to Abner Airlines:

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Assume that today is December 31, 2018, and that the following information applies to Abner Airlines:
● After-tax operating income [EBIT(1 – T)] for 2019 is expected to be $400 million.
● The depreciation expense for 2019 is expected to be $140 million.
● The capital expenditures for 2019 are expected to be $225 million.
● No change is expected in net operating working capital.
● The free cash flow is expected to grow at a constant rate of 6% per year.
● The required return on equity is 14%.
● The WACC is 10%.
● The firm has $200 million of non operating assets.
● The market value of the company’s debt is $3.875 billion.
● 200 million shares of stock are outstanding.

Using the corporate valuation model approach, what should be the company’s stock price today?


Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...
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Fundamentals of Financial Management

ISBN: 978-1337395250

15th edition

Authors: Eugene F. Brigham, Joel F. Houston

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