It is 2022. 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 $4.5 million in debt.

The company is expected to have free cash flow of $25 million in 2023 and $34 million in 2024.

Beyond 2024, 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 7 million shares outstanding.

Part 1

Question A: (5 points)

What is the current enterprise value of Walkerville Woodworking given the above assumptions?

A.

$337.18

million

B.

$366.36

million

C.

$362.86

million

D.

$400.30

million

E.

$329.14

millionQuestion

B:

(5 points)

Part 2 What should be the price of one share of Walkerville stock?

A.

$57.69

B.

$51.34

C.

$48.17

D.

$52.34

E.

$46.52