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A companys weighted average cost of capital is 10.3% per year and the market value of...

A companys weighted average cost of capital is 10.3% per year and the market value of its debt is 320.6 million. The companys free cash flow last year was 8.5 million and it is expected to grow 20% per year for the next three years. Thereafter, the free cash is expected to grow forever at a rate of 8.1% per year. If the company has seven million shares of common stock outstanding, what is the value per share?

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Answer #1
WACC= 10.30%
Year Previous year FCF FCF growth rate FCF current year Horizon value Total Value Discount factor Discounted value
1 8.5 20.00% 10.2 10.2 1.103 9.2475
2 10.2 20.00% 12.24 12.24 1.217 10.05752
3 12.24 20.00% 14.688 721.715 736.403 1.342 548.73547
Long term growth rate (given)= 8.10% Value of Enterprise = Sum of discounted value = 568.04 mn
Enterprise value = Equity value+ MV of debt
568.04 = Equity value+320.6
Equity value = 247.44
share price = equity value/number of shares
share price = 247.44/7
share price = 35.35
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