Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Answer is provided but I have no idea how to get them. please show all steps and calculations s o I can fully understand how
Answer is provided but I have no idea how to get them. please show all steps and calculations so I can fully understand how to solve. thank you
Adjusted Cash Flow from Assets (L03) Cumberland Corp. is expected to have an EBIT of $1.9 million next year. Depreciation, the increase in net working capital, and capital spending are expected to be $165,000, $85,000, and $115,000, respectively. All are expected to grow at 18 percent per year for four years. The company currently has $13 million in debt and 800,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3 percent indefinitely. The company's WACC is 8.5 percent and the tax rate is 35 percent. What is the price per share of the company's stock? rious problem instead of a PV of cash flow from 5+ years Year 4 EBIT 1 $1,900,000 $665,000 $165,000 $85,000 $115,000 2 $2,242,000 $784,700 $194,700 $100,300 $135,700 3 $2,645,560 $925,946 $229,746 $118,354 $160.126 $3,121,761 $1,092,616 $271,100 $139,658 $188,949 Taxes Depreciation Change in NWC Capital spending Cash Flow from Assets Terminal cash flow value Discount factor PV $1,200,000 $1,416,000 $1,670,880 $1,971,638 $2,030,787.55 $36,923,410.04 1.3859 $26,642,983 1.0850 $1,105,991 1.1772 $1,202,829 1.2773 $1,308,145 1.3859 $1,422,684 Value of firm Value of debt Value of equity # shares Price per share $31,682,632 $13,000,000 $18.682.632 800,000 $23.35 . note: this is commonly known as "free-cash flowStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started