Question

Scampini Technologies is expected to generate $25 million in free cash flow next year, and FCF is expected to grow at a constant rate of 3% per year indefinitely. Scampini has no debt or preferred stock, and its WACC is 10%. If Scampini has 45 million shares of stock outstanding, what is the stock's value per share? Do not round intermediate calculations. Round your answer to the nearest cent.

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

Answer 1

From the following information Calculation of stock's value per share use the corporate valuation model.

• Expected Free Cash Flow for next year = FCF₁ = $ 25 million
• Growth Rate = g = 3% per year indefinitely
• WACC = 10 %
• Number of shares outstanding = 45 million

(I) Firm Value = FCF1 / WACC - g

= 25 million / (0.10 - 0.03)

= $ 357142857.14

(II) Stock Value per share = Firm Value / Number of shares outstanding

= 357142857.14 / 45000000.00

  Value per share = $ 7.9365 per share

Scampini Technologies stock's value per share is $ 7.9365