A stock market analyst is evaluating the common stock of Heuser Family Corporation. (HFC). She estimates that the company’s operating income (EBIT) for the next year will be $315 million. Furthermore, she predicts that next year HFC will require $180 million in capital expenditures and depreciation expense will be $24 million, so net capital expenditures for next year will be $156 million. Changes in net operating working capital (NOWC) for next year are expected to be $15 million. Free cash flow is expected to grow at a constant annual rate of 5% per year and the company’s WACC is 10%. The company has $205 million of debt (market value equals book value), $50 million of preferred stock (market value equals book value), and it has 50 million shares of common stock. The firm’s tax rate is 25%.

a. What is the estimated value of free cash flow the first year? 

b. Using the free cash flow valuation method, what is its expected stock price today?