Question
Analysts expect RJR Nabisco to generate free cash flow of $1.09 billion at the end of 1988. Assume that cash flows occur on December 31
Analysts expect RJR Nabisco to generate free cash flow of $1.09 billion at the end of 1988. Assume that cash flows occur on December 31 and today is January 1, 1988. Analysts expect RJRs cash flow to grow at 6% in perpetuity. RJR has a capital structure policy of maintaining its debt at 17.81% its value and it is committed to maintaining that ratio in perpetuity. The required return of shareholders is 13.65% and the required return of lenders is 10%. The tax rate is 40%. There are 250.612 million shares outstanding. Use this information to answer the following questions. Part 1 What is the price of an RJR share? Round your answer to the nearest cent.
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