Assume that today is December 31, 2012, and the following information applies to Pacific Sky Airline:

Question:

Assume that today is December 31, 2012, and the following information applies to Pacific Sky Airline:
• After-tax operating profit [EBIT (1-T), also called NOPAT] for 2013 is expected to be $500 million.
• The net capital expenditures for 2013 are expected to be $100 million (depreciation has already been deducted to arrive at the $100 million).
• No change is expected in net operating working capital.
• The is expected to grow at a constant rate of 6% per year.
• The required rate of return on equity is 14%.
• The WACC is 10%. •The market value of the company's debt is $3 billion.
• 200 million shares of stock are outstanding.
Using the approach, what should the company's intrinsic stock price be today? Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...