Question

CORPORATE VALUATION Scampini Technologies is expected to generate \$150 million in free cash flow next year,...

CORPORATE VALUATION

Scampini Technologies is expected to generate \$150 million in free cash flow next year, and FCF is expected to grow at a constant rate of 7% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 13%. If Scampini has 65 million shares of stock outstanding, what is the stock's value per share? Round your answer to two decimal places.

Each share of common stock is worth \$ ____, according to the corporate valuation model.

Farley Inc. has perpetual preferred stock outstanding that sells for \$42.00 a share and pays a dividend of \$4.00 at the end of each year. What is the required rate of return? Round your answer to two decimal places.

%

PREFERRED STOCK RATE OF RETURN

What will be the nominal rate of return on a perpetual preferred stock with a \$100 par value, a stated dividend of 11% of par, and a current market price of (a) \$61.00, (b) \$90.00, (c) \$110.00, and (d) \$138.00? Round your answers to two decimal places.

1. %
2. %
3. %
4. %

1). Value of Equity = FCF1 / (WACC - g) = \$150 million / (0.13 - 0.07) = \$2,500 million

Share Price = Value of Equity / No. of O/S Shares = \$2,500 million / 65 million = \$38.46

2). kP = Annual Dividend / Current Price = \$4 / \$42 = 0.0952, or 9.52%

3a). r = Annual Dividend / Current Price = \$11 / \$61 = 0.1803, or 18.03%

b). r = Annual Dividend / Current Price = \$11 / \$90 = 0.1222, or 12.22%

c). r = Annual Dividend / Current Price = \$11 / \$110 = 0.10, or 10.00%

d). r = Annual Dividend / Current Price = \$11 / \$138 = 0.0797, or 7.97%

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