Question

Wilbur and Orville are brothers.​ They're both serious​ investors, but they have different approaches to valuing stocks.​ Wilbur, the older​ brother, likes to use the dividend valuation model. Orville prefers the free cash flow to equity valuation model. As it turns​ out, right​ now, both of them are looking at the same stocklong dashWright First​ Aerodynmaics, Inc.​ (WFA). The company has been listed on the NYSE for over 50 years and is widely regarded as a​ mature, rock-solid,​ dividend-paying stock. The brothers have gathered the following information about​ WFA's stock:

Current dividend ​(Upper D 0​)equals​$2.90​/share

Current free cash flow ​(FCF 0​)equals​$1.5 million

Expected growth rate of dividends and cash flows ​(g​)equals7​%

Required rate of return ​(r​)equals16​%

Shares outstandingequals400,000 shares

How would Wilbur and Orville each value this​ stock?

1)The stock price from​ Wilbur's valuation is

2)The stock price from​ orville's valuation is

​

Answer 1

1) The stock price from Wilbur's valuation is $ 34.48

2) The stock price from Orville's valuation is $ 44.58

Calculation is given in the below attached image

Please give upvote and thanks for the same in advance