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On December 31, 2006, a stock analyst has forecasted that Hart Enterprises should generate free cash flows of $1,460 in 2007 and 3,000 in 2008

On December 31, 2006, a stock analyst has forecasted that Hart Enterprises should generate free cash flows of $1,460 in 2007 and 3,000 in 2008 and 4,500 in 2009. Thereafter, free cash flow for Hart Enterprises is expected to grow at an annual rate of 7%. Hart Enterprises has a weighted average cost of capital (WACC) of 11%. Hart Enterprises has Notes Payable and Long-term Debt of $10,000 and no Preferred Stock. Hart Enterprises has 10,000 shares of common stock outstanding.

  1. What is the total value of Hart Enterprises
  2. What is the value, P0, of a share of Hart Enterprises stock
  3. If Hart Enterprises reduces its WACC to 10%, will the value of Hart Enterprises increase or decrease?

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