Analysts have estimated that XYZ Inc. will generate free cash flows (FCF) of $2 million, $2.5 million,

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Analysts have estimated that XYZ Inc. will generate free cash flows (FCF) of $2 million, $2.5 million, and $2.75 million over the next three years, following which they believe that XYZ’s free cash flows will grow at an average annual rate of 3% for an indefinite period of time. If XYZ’s cost of equity capital is 11%, it has 2 million common shares outstanding, and its current share price is $16.50. Based on these estimates, which of the following statements is correct?

	1.	XYZ’s common shares are currently overpriced
	2.	Based on the information provided, it is not possible to determine the intrinsic value of XYZ’s common shares
	3.	XYZ’s common shares are currently correctly priced
	4.	XYZ’s common shares are currently underpriced