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The current price of a company is $55.00, the company is expected to have the following free cash flows below. The firm has a WACC
The current price of a company is $55.00, the company is expected to have the following free cash flows below. The firm has a WACC of 8%. The sustainable growth rate for the firm is 1%. Is the company overvalued or undervalued, and if the current price were to converge to the valuation price, what would be your return?
Cash Flows | $4.25 | $4.25 | $4.50 |
---|---|---|---|
Time Period | 1 | 2 | 3 |
A. Over-Valued, -14%
B. Over-Valued, -41.7%
C. Under-Valued, 41.7%
D. Under-Valued, 14%
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