Question
7) Gonzales Corporation generated free cash flow of $86 million this year. For the next two years, the company's free cash flow is expected to
7) Gonzales Corporation generated free cash flow of $86 million this year. For the next two years, the company's free cash flow is expected to grow at a rate of 10%. After that time, the company's free cash flow is expected to level off to the industry long-term growth rate of 4% per year. If the weighted average cost of capital is 11% and Gonzales Corporation has cash of $100 million, debt of $275 million, and 100 million shares outstanding, what is Gonzales Corporation's expected current share price?
A) $14.37
B) $11.87
C) $12.49
D) $16.24
Please show financial calculator steps of what to input where, Thanks!
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