Question
Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly.Forecasts made at the beginning of 2016 are as follows:
Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly.Forecasts made at the beginning of 2016 are as follows: |
($ millions) | 2017 | 2018 | 2019 | 2020 | 2021 |
Net income | 1.0 | 2.1 | 3.4 | 3.9 | 4.2 |
Investment | 1.0 | 1.1 | 1.3 | 1.5 | 1.5 |
Free cash flow | 0 | 1.0 | 2.1 | 2.4 | 2.7 |
Phoenixs recovery will be complete by 2021, and there will be no further growth in free cash flow. |
a. | Calculate the PV of free cash flow, assuming a cost of equity of 8%. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) |
Present value | $ million |
b. | Assume that Phoenix has 11 million shares outstanding. What is the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Price per share | $ |
c. | What is Phoenixs P/E ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
P/E ratio |
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