QUESTION 8 A company generated a free cash flow of $50 million in its most recent fiscal year. The company's FCFF is expected to grow 6% for one year, followed by a stable growth rate of 2% thereafter in perpetuity. The company's cost of capital is 9%. It has $7 million of debt and $1 million of cash. There are 30 million shares outstanding. How much is each share worth based on these projections? a. $21.9 b. $25.0 C. $29.2 d. $35.1 e. $44.0 A company just reported the following results for its most recent fiscal year (year O): Total revenues: $500 million, Operating profit margin: 40%, Tax rate: 25%, Reinvestment rate: 60%. It has $300 million debt and $2 million cash. Number of shares outstanding is 20 million. You forecast that the company will earn the same FCFF next year (FCFF1), which will then decline at a stable 3% rate (.e., a negative growth rate) in perpetuity thereafter. You estimate that the company's cost of capital is 14%. How much would you be willing to pay for each share? a. $1.8 b. $2.7 c. $3.9 d. $5.1 e. $6.5 A company is expected to generate free cashflows of $60 million next year, projected to grow at a 5% annual rate until the end of year 3, and then at a stable 3% rate in perpetuity thereafter. You estimate that the company's cost of capital is 13%. It has $250 million debt and $15 million cash. Number of shares outstanding is 10 million. How much would you be willing to pay for each share? Round to the nearest cent. a. $29.9 b. $33.8 c. $38.5 d. $46.7 0 0 e. $54.1