Suppose a firm's FCF is expected to be -$30mn in year one, $20mn in year two...

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Suppose a firm's FCF is expected to be -$30mn in year one, $20mn in year two and thereafter, the firm's FCFs are expected to increase by 5% a year for the foreseeable future. Further suppose that the market value of the firm's debt is $50mn and the market value of the firm's preferred stock is $20mn and that the firm has 20 million shares of common stock outstanding. If the required return on the firm's assets is 10%, how much should the stock price per share be selling for? Suppose a firm's FCF is expected to be -$30mn in year one, $20mn in year two and thereafter, the firm's FCFs are expected to increase by 5% a year for the foreseeable future. Further suppose that the market value of the firm's debt is $50mn and the market value of the firm's preferred stock is $20mn and that the firm has 20 million shares of common stock outstanding. If the required return on the firm's assets is 10%, how much should the stock price per share be selling for?

Answer rating: 100% (QA)

To calculate the stock price per share we need to determine the total value of the firms assets whic... View the full answer