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(This question has two parts.) It is 2020. You are investigating the possibility of making an equity investment in Walkerville Woodworking Inc., a firm that
(This question has two parts.) It is 2020. You are investigating the possibility of making an equity investment in Walkerville Woodworking Inc., a firm that specializes in producing antique style furniture with a modern twist. Your research has revealed the following information: Walkerville has $8 million in excess cash and $4.5 million in debt. The company is expected to have free cash flow of $24 million in 2021 and $35 million in 2022 Beyond 2022, free cash flow is expected to grow at a constant rate of 2% per year forever. Walkerville's weighted average cost of capital (WACC) is 11% and it has 8 million shares outstanding. Question A: (5 points) What is the current enterprise value of Walkerville Woodworking given the above assumptions? O A. $337.25 million OB. $345.54 million O C. $375.47 million OD. $371.97 million O E. $410.51 million Question B: (5 points) What should be the price of one share of Walkerville stock? O A. $43.19 OB. $41.72 O C. $46.93
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