Find out the current value of the company


Problem: A company is not expected to generate a FCF over the next four years. Five years from now, the company anticipates that it will generate a FCF of $1.00 (i.e., FCF5=$1.00). The market expects that the FCF will grow at a constant rate of 5 percent per year forever. The risk-free rate is 5 percent, the company's beta is 1.2, and the market risk premium is 5 percent. The required rate of return on the company's stock is expected to remain constant. What is the current value of the company?

A) $7.36

B) $8.62

C) $9.89

D) $10.98

e) $11.53

Solution Preview :

Prepared by a verified Expert
Finance Basics: Find out the current value of the company
Reference No:- TGS01838402

Now Priced at $20 (50% Discount)

Recommended (90%)

Rated (4.3/5)