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Suppose that you are analyzing a stock to determine its intrinsic value. You went to the company's website to find an announcement about an expansion
Suppose that you are analyzing a stock to determine its intrinsic value. You went to the company's website to find an announcement about an expansion plan. The announcement states that the management has decided to borrow $25 million that costs 5% (the WACC) to fund the expansion. The management projects that the expansion will generate the following free cash flows for the next 3 years -$2 million, $8 million, and $15 million.After Year 3, free cash flow is projected to grow at a constant 3%.
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