Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Company ZZZ is an all - equity firm with 1 , 0 0 0 , 0 0 0 shares outstanding. Company ZZZ currently has a

Company ZZZ is an all-equity firm with 1,000,000 shares outstanding. Company ZZZ currently has a cash flow of $10,000,000 USDs and expects future free cash flows of $10,000,000 per year. Management plans to use the cash to expand the firm's operations, which will in turn increase future cash free cash flows to $30,000,000 per year. If the cost of capital of Company ZZZ's investments is 4%, calculate the stock price for the company if the expansion where to happen. Note: Express your answers in strictly numerical terms. For example, if the answer is $500, write enter 500 as an answer."

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions