Question
We are currently at the end of year t. You performed a thorough financial analysis of XYZ and forecast the following Free Cash Flows (FCF):
We are currently at the end of year "t". You performed a thorough financial analysis of XYZ and forecast the following Free Cash Flows (FCF):
Year t+1: 352 million USD
Year t+2: 385 million USD
Year t+3: 407 million USD
From year t+3 onward, you expect the FCFs to grow at a constant yearly rate of 4%.
Through your analysis, you also determined that the appropriate Weighted Average Cost of Capital (WACC) for XYZ was 11%.
Finally, you know that XYZ has 1000 million USD in debt and 100 million shares outstanding.
You are now contemplating the following project: buying 1 share of XYZ today at 35 USD on the exchange.
What is the Net Present Value (NPV) of this project?
Please give your answer in USD.
For example, if your answer is 17 USD, then type in "17".
(Hint: think about what the costs and benefits are for this project. For the benefits, use the price of 1 share of XYZ that you found in Question 3.) 43 USD
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