D Incs. free cash flow was just FCF0 = $1.32. Analysts expect the company's free cash flow to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The WACC for this company 9.00%. D has $4 million in short-term investments and $14 million in debt and 1 million shares outstanding. What is the stock price at year 2? What is the best estimate of the stock's current intrinsic price? If the market price is $33 do you buy or sell? Show all work and discuss. There are three steps: 1. Calculate the dividend/cash flow each year using the growth rate 2. Determine where the growth of the company becomes constant (this is the key constant growth rate model), this is called the terminal or horizon value. 3. Place each of these cash flows (or dividends) into the calculator or excel using the interest rate given and calculate NPV which is called the intrinsic value