Determining the shares of common stock outstanding


You are considering buying common stock in Grow On, Inc. You have calculated that the firm's free cash flow was $7.60 million last year. You project that free cash flow will grow at a rate of 5.0% per year indefinitely. The firm currently has outstanding debt and preferred stock with a total market value of $22.23 million. The firm has 2.94 million shares of common stock outstanding. If the firm's cost of capital is 19.0%, what is the most you should pay per share for the stock now?

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Finance Basics: Determining the shares of common stock outstanding
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