Question
A minor league professional hockey team embarks on an aggressive facility expansion that requires additional capital. Management decides to finance the expansion by borrowing $40
A minor league professional hockey team embarks on an aggressive facility expansion that requires additional capital. Management decides to finance the expansion by borrowing $40 million and by halting dividend payments to increase retained earnings. The projected free cash flows are $5 million for the current year, $10 million for the following year, and $20 million for the third year. After the third year, free cash flow is projected to grow at a constant 6%. The overall cost of capital is 10%. What is the total value? If the company has 10 million shares of stock and $40 million total debt, what is the price per share?
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