Question

Franktown Motors is expected to have an EBIT of $2,200 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $158, $92, and $114, respectively. This yields a year 1 Free Cash Flow of $1,404. All items are expected to grow at 15 percent per year until the end of year 4. The firm currently has $12,098 in debt and 538 shares outstanding. After year 4, the adjusted cash flow from assets is expected to grow at 2.5 percent indefinitely. The company’s WACC is 8.7 percent and the tax rate is 34 percent. What is the price per share of the company’s stock? Show your answer to the nearest $.01. Do not use the $ or , signs in your answer.

Answer #1

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