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E-Board is a new company that sells electronic hoverboards. After studying this form for many weeks, you have come up with the following free cash
E-Board is a new company that sells electronic hoverboards. After studying this form for many weeks, you have come up with the following free cash flow projections for the next three years (the year 1 FCF arrives in exactly 1 year): Year 0 3 FCF ($mil) 0 20 33 44 . FCF in years 4-10 will be 10% higher than in the previous year (so year 4 will be 48.4, for example). FCF in year 11 will be 4% higher than in year 10, and this 4% growth rate will continue forever. E-Board has roughly equal amounts of cash and debt on its balance sheet. Shareholder's Equity on E-Board's balance sheet is $195 million. Its CAPM beta is 2.10 and debt yield to maturity is 6.8%. Assume the market risk premium is 5%. The 1-year U.S. Treasury bill has a yield to maturity of 0.10%, the 5-year Treasury bond yield is 0.42%, and the 30-year Treasury bond yield is 1.73%. E-Board's tax rate is 21%. E-Board has 9 million shares outstanding. . . . a) What is your best estimate of E-Board's stock price? b) The current price of this stock is $88. Would you sell your shares in this company or buy more? E-Board is a new company that sells electronic hoverboards. After studying this form for many weeks, you have come up with the following free cash flow projections for the next three years (the year 1 FCF arrives in exactly 1 year): Year 0 3 FCF ($mil) 0 20 33 44 . FCF in years 4-10 will be 10% higher than in the previous year (so year 4 will be 48.4, for example). FCF in year 11 will be 4% higher than in year 10, and this 4% growth rate will continue forever. E-Board has roughly equal amounts of cash and debt on its balance sheet. Shareholder's Equity on E-Board's balance sheet is $195 million. Its CAPM beta is 2.10 and debt yield to maturity is 6.8%. Assume the market risk premium is 5%. The 1-year U.S. Treasury bill has a yield to maturity of 0.10%, the 5-year Treasury bond yield is 0.42%, and the 30-year Treasury bond yield is 1.73%. E-Board's tax rate is 21%. E-Board has 9 million shares outstanding. . . . a) What is your best estimate of E-Board's stock price? b) The current price of this stock is $88. Would you sell your shares in this company or buy more
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