Question
Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2019 are as follows: ($ millions)
Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2019 are as follows:
| ($ millions) | 2020 | 2021 | 2022 | 2023 | 2024 |
| Net income | 1.0 | 3.7 | 6.6 | 7.10 | 7.4 |
| Investment | 1.0 | 2.7 | 2.9 | 3.1 | 3.1 |
| Free cash flow | 0 | 1.0 | 3.7 | 4.0 | 4.3 |
Phoenixs recovery will be complete by 2024, and there will be no further growth in net income or 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.)
b. Assume that Phoenix has 10 million shares outstanding. What is the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. Confirm that the expected rate of return on Phoenix stock is exactly 8% in each of the years from 2020 to 2024. (Hint: First, calculate the PV of all future cash flows starting in each year. Round your answer to 2 decimal places.)
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Create Wealth How You Can Ditch The 9 5 Job With Multifamily Investing
Authors: Pam Scamardo
1st Edition
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