3. Blueskin Corp. faltered in the recent recession but is recovering. Free cash flow has grown...

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3. Blueskin Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made today (Year 0) are as follows: Year 1 Year 2 2.0 2.5 2.0 2.2 ($ millions) Net Income Investment Year 3 3.0 2.5 Year 4 3.4 2.8 Year 5 3.9 3.2 Blueskin's recovery will be complete by Year 5, and there will be no further growth in net income or free cash flow. A. Calculate the PV of free cash flow, assuming a cost of equity of 10%. B. Assume that Blueskin has 15 million shares outstanding. Calculate the stock price of Blueskin from Year 0 through Year 5. 3. Blueskin Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made today (Year 0) are as follows: Year 1 Year 2 2.0 2.5 2.0 2.2 ($ millions) Net Income Investment Year 3 3.0 2.5 Year 4 3.4 2.8 Year 5 3.9 3.2 Blueskin's recovery will be complete by Year 5, and there will be no further growth in net income or free cash flow. A. Calculate the PV of free cash flow, assuming a cost of equity of 10%. B. Assume that Blueskin has 15 million shares outstanding. Calculate the stock price of Blueskin from Year 0 through Year 5.

Answer rating: 100% (QA)

Step 13 Cost of Equity r 10 010 millions Net Income Investment Free Cash Flow Formula Step 23 Year 1 ... View the full answer