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Suppose that the free cash flow per share for the S&P 5 0 0 companies as a whole was $ 1 8 0 last year.

Suppose that the free cash flow per share for the S&P 500 companies as a whole was $180 last year. Currently, investors expect the free cash flow to grow by 2% every year in real terms in future years. Assuming that investors demand a 5.75% real annualized rate of return, what would be the price per share? Use these numbers as the baseline scenario. Now assume that all of a sudden, investors expect a big but temporary recession to hit the U.S. economy such that the free cash flow is expected to be 50% smaller than the baseline projection in 2024,30% smaller in 2025, and 20% smaller in 2026, and the same as the baseline projection starting in 2027 and all future years. What will be the new price per share when investors' expectation suddenly changes?

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