U, I and A are brothers. They have different approach in valuing stock. At the moment, each one of them is analyzing the same stock; BCB. They have collected some information about the stock:
Current dividend = RM2.50 Expected growth rate = 9% Required return = 15% Upin will use constant growth dividend model for his analysis on the value. Ipin believes the dividend for the stock will growth at 12% beginning year 4. He is going to value the stock using dividend valuation model.
Apin does not believe in valuation using dividend model. He conducts further analysis on the stock cash flow and manages to prepare the free cash flow analysis. He found out that FCF for this year is RM300,000 while the projected FCF for the next two years will be RM350,000 and RM200,000 respectively after which the growth rate of the FCF beyond the third year will be 4%.
The company is currently having a RM3,500,000 debts in value and RM200,000 preferred shares. The numbers of common shares outstanding is currently 500,000. Calculate the value of the stock for the three brothers using their preferred valuation method.