Question
A firm is expected to have -$10 per share in free cash flow next year, then free cash flow of $5 per share two years
A firm is expected to have -$10 per share in free cash flow next year, then free cash flow of $5 per share two years from now, and $8 per share three years from now. Then, the firms free cash flow is expected to grow by 3% thereafter forever. The discount rate for the firms equity is 13%.
- What is a fair stock price for this firms stock?
- The firms stock is currently trading at $76.52 per share on the NASDAQ. Will you consider buying the stock?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
12th edition
978-0324597714, 324597711, 324597703, 978-8131518571, 8131518574, 978-0324597707
