Question
A firm has just reported EBIT of $1,000 for the year that has just ended. The firm also recorded $300 in depreciation and made a
A firm has just reported EBIT of $1,000 for the year that has just ended. The firm also recorded $300 in depreciation and made a $500-dollar investment in new machinery. No other changes or financial information was reported. Going forward the firm expects Free cash flow to grow at a rate of 3% per year. The weighted average cost of capital for the firm is 11.5% and the tax rate is 21%. The firm has 10 bonds outstanding. The bonds have a face value of $100, pay an annual coupon with a coupon rate of 5% and a yield to maturity of 4%. The bonds mature in 4 years. The firm also has 1,000 shares of stock outstanding and $250 in cash. What is the share price of the firm? please show work not using excel
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