A firm's stock is currently trading at $40 per share. Assume that the firm is in a
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A firm's stock is currently trading at $40 per share. Assume that the firm is in a stable growth phase with an expected long-term cashflow growth of 2.5%. Effective tax rate is 25%. The firm's debt carries a BBB credit rating. Most recent data available for the firm is as follows
| All in $ millions except per share amounts and percentages | |
| EBIT | $341 |
| Capex | $25 |
| Depreciation expense | $50 |
| Change in Accounts Payable | - $45 |
| Change in Inventories | - $25 |
| Change in Accounts Receivable | - $50 |
| Total debt | $1000 |
| Cash and cash equivalents | $100 |
| Shares outstanding | 88 |
| Beta | 1.25 |
| Default spread on BBB rated firms | 1.5% |
| Market risk premium | 5.5% |
| Yield to maturity on 30-year Treasury | 2.9% |
- What is the firm's WACC?
- What is the firm's free cash flow?
- What is the firm's enterprise value and price per share?
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