Question

11. More on the corporate valuation model

Qwerty Logistics Corp. is expected to generate a free cash flow (FCF) of $7,600.00 million this year (FCF₁ = $7,600.00 million), and the FCF is expected to grow at a rate of 20.20% over the following two years (FCF₂ and FCF₃). After the third year, however, the FCF is expected to grow at a constant rate of 2.46% per year, which will last forever (FCF₄). Assume the firm has no nonoperating assets. If Qwerty Logistics Corp.’s weighted average cost of capital (WACC) is 7.38%, what is the current total firm value of Qwerty Logistics Corp.? (Note: Round all intermediate calculations to two decimal places.)

$23,868.87 million

$250,269.71 million

$252,540.21 million

$208,558.09 million

Qwerty Logistics Corp.’s debt has a market value of $156,419 million, and Qwerty Logistics Corp. has no preferred stock. If Qwerty Logistics Corp. has 750 million shares of common stock outstanding, what is Qwerty Logistics Corp.’s estimated intrinsic value per share of common stock? (Note: Round all intermediate calculations to two decimal places.)

$69.52

$68.52

$76.47

$208.56

Answer 1