Question: 2. In the Chapter 2 discussion assignment, you were provided with the following information for the Luna Lighting Company: Luna Lighting Company Balance Sheets as

2. In the Chapter 2 discussion assignment, you were provided with the following information for the Luna Lighting Company: Luna Lighting Company Balance Sheets as of December 31, 2021 and 2022 2021 2022 Accounts Payable $ 361 $ 444 Short-term Notes Payable 315 270 Long-term Deferred Taxes 318 412 Long-term Debt 2,869 2,956 Common Stock 456 610 Retained Earnings 4,591 4,741 Total Liabilities & Equity $8,910 $9,433 2021 2022 Cash $ 141 $ 184 Marketable securities 56 32 Accounts receivable 1,025 1,167 Inventory 918 963 Net Fixed Assets 6,770 7,087 Total Assets $8,910 9,433 a. Considering the left-hand side of the cash flow identity (cash flows from assets associated with investment activities), determine Luna Lighting Companys free cash flow (FCF) for the year 2022. b. Luna has 1,000 shares of common stock outstanding. Under the assumption that FCFs will grow by 2 percent into the foreseeable future, compute an estimate of the price per share based on FCFs if investors require a 9 percent return c. If Lunas current dividend is also expected to grow at 2 percent into the foreseeable future, what would then be the estimated price per share?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!