Question
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
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 stock - Wright 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 (D0) = $2.50 / per share
Current free cash flow (FCF0) = $1.0 million
Expected growth rate of dividends and cash flows (g) equals= 6%
Required rate of return (r) equals=15%
Shares outstanding equals=500,000 shares
How would Wilbur and Orville each value this stock?
Questions: (round both to the nearest cent)
A. The stock price from Wilbur's valuation is ?
B.The stock price from Orville's valuation is ?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started