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(This question has two parts.) It is 2021. You are investigating the possibility of making an equity investment in Walkerville Woodworking Inc., a firm that
(This question has two parts.) It is 2021. 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 $25 million in 2022 and $31 million in 2023. Beyond 2023, 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 7 million shares outstanding. Question A: (5 points) What is the current enterprise value of Walkerville Woodworking given the above assumptions? O A. $336.33 million OB. $366.97 million O C. $332.83 million OD. $309.42 million O E. $302.08 million Question B: (5 points) What should be the price of one share of Walkerville stock? O A. $42.65 B. $52.92 C. $47.05 D. $44.20 O E. $48.05
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