Stetson Building Supplies' last free cash flow was $1.85 million. Its free cash flow growth rate...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Stetson Building Supplies' last free cash flow was $1.85 million. Its free cash flow growth rate is expected to be at 25% for year 1 and 12% for Year 2, after which free cash flows are expected to grow at a rate of 6% forever. Its weighted average cost of capital WACC (or r) is 12%. Stetson has $5 million in short-term investments and $7 million in debt and has 2 million shares outstanding. What is the best estimate of the current intrinsic stock price? (8 points) Stetson Building Supplies' last free cash flow was $1.85 million. Its free cash flow growth rate is expected to be at 25% for year 1 and 12% for Year 2, after which free cash flows are expected to grow at a rate of 6% forever. Its weighted average cost of capital WACC (or r) is 12%. Stetson has $5 million in short-term investments and $7 million in debt and has 2 million shares outstanding. What is the best estimate of the current intrinsic stock price? (8 points)
Expert Answer:
Answer rating: 100% (QA)
Intrinsic value Present Value of future Free Cash Flows Year 1 185112 208 million Year 2 20... View the full answer
Related Book For
Financial Reporting and Analysis Using Financial Accounting Information
ISBN: 978-1439080603
12th Edition
Authors: Charles H Gibson
Posted Date:
Students also viewed these finance questions
-
The following is the balance sheet of Ingram Industries: Required Indicate your criticisms of the balance sheet and briefly explain the proper treatment of any itemcriticized. INGRAM INDUSTRIES...
-
The following information comes from the balance sheet of Nordstrom, Inc.: 1. Calculate the debt-to-equity ratio for the years shown. 2. Who would be interested in this information and why? 3....
-
The balance sheet of the Boyd Trucking Company (BTC) follows: BTC had sales for the year ended December 31, 2013, of $ 25 million. The firm follows a policy of paying all net earnings out to its...
-
Q2. (20 pts) Product structure tree of product A is given in the following table: B(2) A C(3) D(3) E(4) F(5) E(6) a. How many components of each kind to produce 5 product A? b. Draw operation process...
-
A global pharmaceutical company offers defined-benefit plans to its employees. The following table presents select data about Eli Lillys defined-benefits pension plan. Eli Lilly reports under U.S....
-
What is the specific heat of a metal substance if 135 kJ of heat is needed to raise 4.1 kg of the metal from 18.0C to 37.2C?
-
Describe the differences between data, information, knowledge and wisdom?
-
Record in T accounts the following stock transactions of Pigua Corporation, which represent all the companys treasury stock transactions during 2011: May 5Purchased 1,600 shares of its own $2 par...
-
The code of a program as follows. #include #include int main() { int i; for (i=0; i <4; i++) { fork(); } return 0; } Including itself, how many processes are created by the program shown above?
-
The results below are based on data collected as part of a student project for an introductory statistics class at UF. If there is more than one group/treatment, the first group mentioned is group 1....
-
In March the Klassic Clothing Company started working on a special order of fall suits ordered by Winston?s, a regional chain of specialty stores in the southeast United States. Winston?s agreed to...
-
The ellipse x+2y2 - 16x-16y - 296 = 0 has its center at x =
-
Fern has her own garden waste clearance business, JunkBunk. During exceptionally busy periods, she often gets her friend, Rose, to assist her with the heavy lifting. Fern is contacted by Mary, the...
-
Portia Ndlovu was recently appointed as company secretary at Azara (Pty) Ltd, a company with a 31 January financial year-end. She is required to organize the first annual general meeting for 2023....
-
Two point charges, -3.8C and 8.892 C, are placed at x=0 cm and x = 13.4 cm, respectively. Consider the x-axis directed to the right. 8a At what point along the x axis is the electric field zero?...
-
The circle x2 + y+6x-14y+ 57 = 0 has a radius = The circle x + y - 8x - 6y-24 = 0 has a center at x = y=. The ellipse with center at (0, 0), vertex at (0, -10), x-intercept at (6, 0) has it's foci at...
-
Currency Values and Trade (5 Points) In our pretend world there are two countries - Chile and Switzerland - that are engaged in trade. The firm Switzerland Chocolates Express sells Boxes of chocolate...
-
The roof of a refrigerated truck compartment is of composite construction, consisting of a layer of foamed urethane insulation (t2 = 50 mm, ki = 0.026 W/m K sandwiched between aluminum alloy panels...
-
The days sales in inventory is an estimate of the number of days that it will take to sell the current inventory. a. What is the ideal number of days sales in inventory? b. In general, does a company...
-
a. 1. The statement is entitled Consolidated Balance Sheets.'' What does it mean to have a consolidate balance sheet? 2. For subsidiaries where control is present, does Kellogg have 100% ownership?...
-
Multiple-choice questions: a. Audit opinions cannot be classified as which of the following? 1. All-purpose 2. Disclaimer of opinion 3. Adverse opinion 4. Qualified opinion 5. Unqualified opinion b....
-
Diagram the situation described in Exercise 15.3 along the lines of Figure 15.2. Exercise 15.3 In Section 12.3 we looked at a set of data on whether children who are stressed from their parents...
-
Two graduate students have recently completed their dissertations. Each used a t test for two independent groups. One found a barely significant t using 10 subjects per group. The other found a...
-
If = 15, n = 25, and we are testing H 0 : = 100 versus H 1 : > 100, what value of the mean under H 1 would result in power being equal to the probability of a Type II error?
Study smarter with the SolutionInn App