Question
It is 2019. You are investigating the possibility of making an equity investment in Walkerville Woodworking Inc., a firm that specializes in producing antique- style
It is 2019. You are investigating the possibility of making an equity investment in Walkerville Woodworking Inc., a firm that specializes in producing antique- style furniture with a modern twist. Your research has revealed the following information: Walkerville has $8 million in excess cash and $1.5 million in debt. The company is expected to have free cash flow of $26 million in 2020 and $30 million in 2021. Beyond 2021, free cash flow is expected to grow at a constant rate of 2% per year forever. Walkervilles weighted average cost of capital (WACC) is 11% and it has 8 million shares outstanding. (5 points) What should be the price of one share of Walkerville stock?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started