Question
Please assist with the following: Wilbur and Orville are brothers.They're both seriousinvestors, but they have different approaches to valuing stocks.Wilbur, the olderbrother, likes to use
Please assist with the following:
Wilbur and Orville are brothers.They're both seriousinvestors, but they have different approaches to valuing stocks.Wilbur, the olderbrother, likes to use the dividend valuation model. Orville prefers the free cash flow to equity valuation model. As it turnsout, rightnow, both of them are looking at the same stockWright FirstAerodynmaics, Inc.(WFA). The company has been listed on the NYSE for over 50 years and is widely regarded as amature, rock-solid,dividend-paying stock. The brothers have gathered the following information aboutWFA's stock:
Current dividend (D0)=$3.30/share
Current free cash flow (FCF0)=$1.0 million
Expected growth rate of dividends and cash flows (g)=5%
Required rate of return (r)=14%
Shares outstanding=550,000 shares
How would Wilbur and Orville each value thisstock?
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