Heinfeldt Inc. forecasts the free cash flows (FCFs) (in millions) shown below. The weighted average cost of capital (WACC) is 12%, and the FCFs are expected to continue growing at a 4% rate after Year 3. The firm has $168.05 million of market - value debt, but it has no preferred stock or any other outstanding claims. There are 50 million shares outstanding. Year 1 2 3 FCF $80 $ 130 $200 a. What is the estimated stock price today ( Year 0)? b. Set up a simple Excel data table where you show how the estimated intrinsic value varies as the long - run growth rate varies over the following range (2.00%, 2.25%, 2.50%, 2.75%, 3.00%, 3.25%, 3.50%, and 4.75%) assuming everything else stays constant.

Heinfeldt Inc. forecasts the free cash flows (FCFs) (in millions) shown below. The weighted average cost of capital (WACC) is 12%, and the FCFs are expected to continue growing at a 4% rate after Year 3. The firm has $168.05 million of market - value debt, but it has no preferred stock or any other outstanding claims. There are 50 million shares outstanding. Year 1 2 3 FCF $80 $ 130 $200 a. What is the estimated stock price today ( Year 0)? b. Set up a simple Excel data table where you show how the estimated intrinsic value varies as the long - run growth rate varies over the following range (2.00%, 2.25%, 2.50%, 2.75%, 3.00%, 3.25%, 3.50%, and 4.75%) assuming everything else stays constant.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter14: Distributions To Shareholders: Dividends And Repurchases

Section: Chapter Questions

Problem 12P

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