Basic Stock Valuation: Free Cash Flow Valuation Model

valuation approach, known as the free cash flow valuation model. The market value of a firm is equal to the present value of its expected future free cash flows:

$\{\begin{array}{ccc}\text{:}[& \text{M}\text{a}\text{r}\text{k}\text{e}\text{t}\text{v}\text{a}\text{l}\text{u}\text{e}& ]\\ & of\text{c}\text{o}\text{m}\text{p}\text{a}\text{n}\text{y}& \end{array}=\frac{FC{F}_1}{(1+\text{W}\text{A}\text{C}\text{C}{)}^1}+\frac{FC{F}_2}{(1+\text{W}\text{A}\text{C}\text{C}{)}^2}+$cdots$+\frac{FC{F}_{}}{(1+\text{W}\text{A}\text{C}\text{C}{)}^{}}$

flows begin to grow at a constant rate, the equation to calculate the continuing value of the firm at that date is:

arrive at the market value of equity. The market value of equity is divided by the number of common shares outstanding to estimate the firm's intrinsic per$-$share value.

firm has a period of nonconstant growth.

should be the company's stock price today $($December $31,2019)?$ Do not round intermediate calculations. Round your answer to the nearest cent.

$ per share

Quantitative Problem $2$: Hadley Inc. forecasts the year$-$end free cash flows $($in millions$)$ shown below.

claims. There are $20$ million shares outstanding. What is the value of the stock price today $($Year $0)?$ Do not round intermediate calculations. Round your answer to the nearest cent.

$

per share

According to the developed valuation models, the value that an investor assigns to a share of stock is dependent on the length of time the investor plans to hold the stock.

The statement above is