Peter is an analyst at Hot Investments and he has been directed by his supervisor to determine the value of Holt construction company. Peter reviewed Holt's financial statements and forecasts its free cash flows (FCF) over the next five years as follows:

Year

Free cash flow

2015

$400,000

2016

300,00

2017

550,000

2018

450,000

2019

400,000

Peter believes that the FCF will cease to grow beyond the year 2019. Furthermore, Peter calculated that the weighted average cost of capital of the firm is 7% while the market required return of equity is 13%. Holt's financial statements stated that the company's capital structure contains only debt and equity, while the market value of the debt/equity ratio is always maintained at 0.5. Holt has 1,000,000 shares of common stock outstanding.

a. Based on the information above, estimate the value of Holt Construction company entire company by using free cash flow valuation model

b. What is Holt's stock price based on your answer in part a?

c. If Holt plans to increase the use of debt in the next year and change its debt/equity ratio to 0.3, what will be the stock price next year?