Question
An analyst is trying to estimate the intrinsic value of XYV Inc. The analyst has estimated the companys free cash flows for the following years:
An analyst is trying to estimate the intrinsic value of XYV Inc. The analyst has estimated the companys free cash flows for the following years:
Year Free Cash Flow
1 $3,000
2 $4,000
3 $5,500
4 $8,500
The analyst estimates that after four years (t=4) the companys free cash flow will grow at a constant rate of 3 per cent per year. The estimated weighted average cost of capital is 8 percent. The companys debt has a total market value of $75,000 and there are 2,000 outstanding shares of common stock. What is the intrinsic value per share of the companys stock?
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