Question

McCaffrey's Inc. has never paid a dividend, and when the firm might begin paying dividends is...

McCaffrey's Inc. has never paid a dividend, and when the firm might begin paying dividends is not known. Its current free cash flow (FCF) is $100,000, and this FCF is expected to grow at a constant 7% rate. The weighted average cost of capital (WACC) is 11%. McCaffrey's currently holds $325,000 of non-operating marketable securities. Its long-term debt is $1,000,000, but it has never issued preferred stock. McCaffrey's has 50,000 shares of stock outstanding.

Calculate the following:

  1. McCaffrey's value of operations
  2. The company's total value
  3. The estimated value of common equity
  4. The estimated per-share stock price
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