Question

Assume that today is December 31,2018 and that the following information applies to Vermeil Airlines:

• After-tax operating income [EBIT(1 – T)] for 2019 is expected to be $577 million.
• The depreciation expense is expected to be $106 million.
• The capital expenditures are expected to be $177 million.
• No change is expected in net operating working capital.
• The free cash flow is expected to grow at a constant rate of 4.6% per year.
• The required return on equity is 12.3%.
• The WACC is 8.6%.
• The market value of the company’s debt is $3 billion.
• 252 million shares of stock are outstanding.

Using the corporate valuation model approach, what should be the company’s stock price today?

Answer 1

Formulae

Formulae as above