A company estimates the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 6% rate. The company's cost of capital is 12%. the company has $3 million in marketable securities, $50 million in debt, and 10 million shares of stock.
Year
1 2 3
Free cash flow ($ millions) -5 15 30
a. Calculate the company's horizon, value?
b. Calculate the company's current value of operations.
c. Calculate the value of one share of share?
d. The stock is selling for $32.50. Is it appropriately priced in the market? Explain.