Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Wilbur and Orville are brothers. They're both serious investors, but they have different approaches to valuing stocks. Wilbur, the older brother, likes to use the

image text in transcribed

Wilbur and Orville are brothers. They're both serious investors, but they have different approaches to valuing stocks. Wilbur, the older brother, likes to use the dividend valuation model. Orville prefers the free cash flow to equity valuation model. As it turns out, right now, both of them are looking at the same stockWright First Aerodynmaics, Inc. (WFA). The company has been listed on the NYSE for over 50 years and is widely regarded as a mature, rock-solid, dividend-paying stock. The brothers have gathered the following information about WFA's stock: Current dividend (D.) = $2.50/share Current free cash flow (FCF) = $1.0 million Expected growth rate of dividends and cash flows (g) = 8% Required rate of return (r) = 13% Shares outstanding = 450,000 shares How would Wilbur and Orville each value this stock? The stock price from Wilbur's valuation is $ 54.00. (Round to the nearest cent.) The stock price from Orville's valuation is $. (Round to the nearest cent.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Institutions Management A Risk Management Approach

Authors: Anthony Saunders, Marcia Cornett

7th Edition

0073530751, 9780073530758

More Books

Students also viewed these Finance questions