(DCF valuation) Houda Motors has a just announced results that show that the FCF for the past year is $23 million. An experienced analyst believes that the growth rate of the FCF for the next 10 years will be 25% per year and that after 10 years the growth rate will be 7% annually. Houda’s WACC is 18%, and the company has 100 million shares outstanding.

a. Value the shares assuming that the FCFs occur at year-end. Houda has no debt and no excess cash reserves.

b. Suppose that the FCFs occur in mid-year. What would your answer be now?