Covan, Inc is expected to have the following free cash flow Year 1 2 3 4 FCF 13 15 16 17 Grow by 4 per year a Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt If its cost of capital is 11 , what should be its stock price b Covan adds its FCF to cash, and has no plans to add debt If you plan to sell Covan at the beginning of year 2, what is its expected price c Assume you bought Covan stock at the beginning of year 1 What is your expected return from holding Covan stock until year 2 Covan, Inc is expected to have the following free cash flow 4 17 Year 1 2 3 FCF 13 15 16 Grow by 4 per year a Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt If its cost of capital is 11 , what should be its stock price b Covan adds its FCF to cash, and has no plans to add debt If you plan to sell Covan at the beginning of year 2, what is its expected price c Assume you bought Covan stock at the beginning of year 1 What is your expected return from holding Covan stock until year 2

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Covan, Inc. is expected to have the following free cash flow: Year 1 2 3 4 FCF 13 15 16 17 Grow by 4% per

Covan, Inc. is expected to have the following free cash flow:

Year

FCF

Grow by

4% per year

a. Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt. If its cost of capital is 11%, what should be its stock price?

b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price?

c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? image text in transcribed

Covan, Inc. is expected to have the following free cash flow: 4 17 Year 1 2 3 FCF 13 15 16 Grow by 4% per year a. Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt. If its cost of capital is 11%, what should be its stock price? b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2