Question
Lex Corp. is expected to generate a free cash flow (FCF) of $11,275 million in one year, and the FCF is expected to grow at
Lex Corp. is expected to generate a free cash flow (FCF) of $11,275 million in one year, and the FCF is expected to grow at a rate of 20.20% over the following two years. After the third year, however, the FCF is expected to grow at a constant rate of 2.46% per year, which will last forever. Lex Corp.'s debt has a market value of $232,055 million, and Lex Corp. has no preferred stock. If the company has 450 million shares of common stock outstanding and weighted average cost of capital (WACC) of 7.38%, what is the value of its common stock according to the Corporate Valuation Model?
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