Gilligan's Boat Tours Ltd. most recent free cash flow was$100,000. The company expects free cash flows to grow at 30% peryear for the next three years and then be stable in future years.The company’s cost of equity (rs) is 12% and its WACC is 11%. Thecompany has $400,000 in long-term debt and has 50,000 common sharesoutstanding.

a.Calculate Gilligan's Boat Tours Ltd. current common shareprice

b.

1. 
   
2. Below are two industry average multiples. Gilligan's Boat ToursLtd. capital structure is significantly different than othercompanies in the same industry.

Industry Averages
EBITDA multiple	2.5x
P/E multiple	6.0x

Which multiple would be most suitableto use to estimate Gilligan's Boat Tours Ltd. value relative tocompanies in the same industry? You do not need to calculateanything, just explain briefly.

Answer rating: 100% (QA)

1 Value of the FirmFCF11WACC FCF21WACC2FCF3Horizon value at year31WACC3 FCF1100000130 130000 FCF2FCF... View the full answer