corporate valuation model. The market value of a firm is equal to the present value of its expected future free cash flows plus the market value of its non$-$operating assets:

Market value

$of$ company

the equation to calculate the continuing value of the firm's operations at that date is:

Horizon value $=V_{\text{C}\text{o}\text{m}\text{p}\text{a}\text{n}\text{y}\text{'}\text{s}\text{o}\text{p}\text{e}\text{r}\text{a}\text{t}\text{i}\text{o}\text{n}\text{s}att}=N=FC\frac{F_{N+1}}{WAC{C}_F{g}_{FCF}}$

and preferred are subtracted to arrive at the market value of equity. The market value of equity is divided by the number of common shares outstanding to estimate the firm's intrinsic per$-$share value.

growth.

your answer to the nearest cent.

$

per share

Quantitative Problem $2$: Hadley Inc. forecasts the year$-$end free cash flows $($in millions$)$ shown below.

outstanding. Also, the firm has zero non$-$operating assets. What is the value of the stock price today $($Year $0)?$ Round your answer to the nearest cent. Do not round intermediate calculations.

$ per share

According to the valuation models developed in this chapter, the value that an investor assigns to a share of stock is dependent on the length of time the investor plans to hold the stock.

The statement above is

Conclusions

should find the same intrinsic value using either model, but differences are often observed.

and financing needs. Also, such an analysis can provide insights into actions that might be taken to increase the company's value; and for this reason, it is integral to the planning and forecasting process.