Question

Beishan Technologies' end-of-year free cash flow (FCF1) is expected to be $70 million, and free cash flow is expected to grow at a constant growth rate of 5% a year in the future. The firm's WACC is 10%, and it has $600 million of long-term debt and preferred stock. If the firm has 34 million shares of common stock outstanding, what is the estimated intrinsic value per share of their common stock?

Your answer should be between 14.20 and 68.54

Answer 1

Value of firm = FCF1/(WACC -growth rate)
	70/(10%-5%)
	1400
Value of equity = Value of firm - Value of debt - value of preferred share
	1400-600
	800	million
Number of share =	34	million
Price per share = 800/34	$            23.53
answer =		$            23.53