You are going to value a firm using the free cash flow to firm (FCFF) approach. Based on its financial statements, the current FCFF in year 0 is calculated as 8.4 million. As the firm is a leader in the industry, its FCFF is expected to grow by 17% over the next two years. After that, due to more competitors, the firm will maintain a constant growth rate of 4%. The weighted average cost of capital (WACC) is estimated to be 8.3% and the cost of equity for the firm is estimated to be 20%. The company has 8.0 million long-term debt and 18.6 million common shares outstanding.
What is the fair price of its common share (in two decimal places)?

Answer rating: 100% (QA)

Fair Price of Common Share FCFFt1WACCt PVofGrowth Where t 0 FCFF0 84 million W... View the full answer