Question
ABC Corporation has the forecast of its Free Cash Flow (FCF) for the next four years as follows (numbers are in million $): Years 2021
ABC Corporation has the forecast of its Free Cash Flow (FCF) for the next four years as follows (numbers are in million $):
| Years | 2021 | 2022 | 2023 | 2024 |
| FCF | 310 | 330 | 345 | 360 |
The company expects FCFs to grow at 2% beyond 2024. ABC can borrow in the bond market at 6%, and its beta is 1.2. The risk-free rate is 3% and the market risk premium is 5%. ABCs assets are funded by 60% debt and 40% equity, and its tax rate is 40%. ABCs current short term debt is $900 million and its long-term debt stands at &1200. The company has 100 million shares outstanding. What is the intrinsic value of the stock?
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Pricing And Hedging Financial Derivatives A Guide For Practitioners
Authors: Leonardo Marroni, Irene Perdomo
1st Edition
1119953715, 978-1119953715
