Scampini Technologies is expected to generate $150 million in free cash flow next year, and FCF is expected to grow at a constant rate of 7% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 12%. If Scampini has 60 million shares of stock outstanding, what is the stock's value per share? Round your answer to two decimal places.
Each share of common stock is worth $ , according to the corporate valuation model.
| Step-1:Calculate present value of Free Cash flow | ||||||||||
| Present Value of Free Cash flow | = | FCF1/(Ke-g) | Where, | |||||||
| = | 150/(12%-7%) | FCF1 | = | $ 150 | million | |||||
| = | $ 3,000 | million | Ke | = | 12% | |||||
| g | = | 7% | ||||||||
| Step-2:Calculate Value per share | ||||||||||
| Value per share | = | Total Value of firm/Total Number of shares | ||||||||
| = | $ 3,000 | million | / | 60 | million | |||||
| = | $ 50.00 | |||||||||
| Thus, According to corporate vauation model, each share of common stock is worth $ 50.00 | ||||||||||
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