Question
Your company is evaluating a purchase of Skeksis Crystal Mining LLC. Skekis produced free cash flow of $7.3m last year, and this is expected to
Your company is evaluating a purchase of Skeksis Crystal Mining LLC. Skekis produced free cash flow of $7.3m last year, and this is expected to grow at 11% for the next five years before leveling off to a long term growth rate of 2%. Your company has a cost of capital of 10%, while Skeksis has a cost of capital of 13%. Skeksis has 3 million shares outstanding and $25m in debt. What would be the highest price you would pay per share of Skeksis’ stock? Please show ALL work don't compute on excel please!
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