Question
Estimate a current stock price for Montana Corporation using the following information. Projected free cash flows for the next three years are shown in the
Estimate a current stock price for Montana Corporation using the following information. Projected free cash flows for the next three years are shown in the table below. Assume the growth rate in years 1 through 3 continues into the future.
| Year | 1 | 2 | 3 |
|---|---|---|---|
| Free cash flow | $ 1,000,000 | $ 1,050,000 | $ 1,102,500 |
Calculate the terminal value as a growing perpetuity. Montana's WACC is 18%, the market value of its debt is $5 million, and it has 1.2 million shares of stock outstanding.
Step by Step Solution
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Step: 1
To calculate the terminal value as a growing perpetuity we can use the formula Terminal Value FCF3 x ...
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Financial Reporting Financial Statement Analysis And Valuation A Strategic Perspective
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
8th Edition
1285190904, 978-1305176348, 1305176340, 978-1285190907
