Question
Portage Bay Enterprises has $ 1 million in excess cash, no debt, and is expected to...
Portage Bay Enterprises has
$ 1
million in excess cash, no debt, and is expected to have free cash flow of
$ 11
million next year. Its FCF is then expected to grow at a rate of
3 %
per year forever. If Portage Bay's equity cost of capital is
13 %
and it has
66
million shares outstanding, what should be the price of Portage Bay stock?
The price of Portage Bay's stock is
per share. (Round to the nearest cent.)
Homework Answers
Answer #1
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Answer:
= $11M/(13%-3%)
= 110,000,000
= (110000000-1000000)/66M
= 1.65
In order to find the stock price we need to calculate the firm value Firm Value = FCF WACC - Growth Rate
Therefore the stock price is, Fim Value +Excess Cash Value Stock Price = Shares Outstanding
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