Question
Hadley Inc. forecasts the year-end free cash flows (in millions) shown below. Year 1 2 3 4 5 FCF -$22.3 $38.1 $43.1 $51.5 $56.2 The
Hadley Inc. forecasts the year-end free cash flows (in millions) shown below.
Year | 1 | 2 | 3 | 4 | 5 |
FCF | -$22.3 | $38.1 | $43.1 | $51.5 | $56.2 |
The weighted average cost of capital is 10%, and the FCFs are expected to continue growing at a 3% rate after Year 5. The firm has $26 million of market-value debt, but it has no preferred stock or any other outstanding claims. There are 21 million shares 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 -
Select-true/false
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