Question: Given are the following data for year 1: Profits after taxes = $12 million; Depreciation = $6 million; Interest expense = $6 million; Investment in
Given are the following data for year 1: Profits after taxes = $12 million; Depreciation = $6 million; Interest expense = $6 million; Investment in fixed assets = $12 million; Investment in working capital = $3 million. The corporate tax rate is 19 percent. Assume that free cash flow grows at a rate of 5 percent for year 2 and 3, and then it grows at a rate of 3 from year 4 and beyond. The weighted average cost of capital is 9 percent. If the company has $20 million debt and 1 million shares outstanding. What is the value per share?
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