Koch Industries is considering acquiring (buying all the common stock of) a private toilet paper manufacturer called Great Lakes Tissue Company (GLTC), and GLTC's common stockholders have collectively decided to entertain the notion of selling all of their shares to Koch. GLTC currently has outstanding debt of $50 million, outstanding preferred stock of $20 million, and 1 million of shares of common stock outstanding. Koch's analysts have estimated that GLTC will generate Free Cash Flow of $10 million in the coming year (Year 1) and that GLTCs free cash flow will grow by 10% per year during Years 2, 3, and 4. After Year 4, Kochs analysts project that growth in GLTC's free cash flows will settle down to a long-run growth rate of 5% per year, permanently. Koch's analysts have concluded that a reasonable estimate of GLTC's WACC is 10%.

How much should Koch be willing to pay for each share of GLTC's common stock? For simplicity, assume that GLTC's Year 1 free cash flow will be realized one year from today, GLTC's Year 2 free cash flow will be realized two years from today, and so on.

• $123

• $157

• $94

• $227

• None of the above