Respuesta :
Answer:
Company’s stock price today (December 31, 2013) is $ 40.43
Explanation:
Free cash flow = EBIT*(1-T)+DE-WCC-CE
EBIT = Earning Before Interest and Taxes
T=Tax rate
EBIT*(1-T) = $450million
DE=Depreciation expenses = $60million
WCC=Working capital change = $25 million
CE=Capital expenditure = $100 million
Free cash Flow(FCF) in 2014=(450+60-25-100)
= $385million
Growth rate of FCF = 4.5%
= 0.045
Weighted average cost of capital(WACC) = 8.3%
=0.083
Present Value(PV) of Free Cash Flow=FCF/(R-g)
R=required rate of return = WACC
=0.0843
G=Growth rate of FCF=0.045
Present value of FCF=(385/(0.083-0.045))
= 385 / 0.038
= $ 10,131.58 million
Value of Equity +Value of Debt = Present value of FCF
= $ 10,131.58 million
Value of Equity = $10,131.58 million-$2450 million
= $ 7,681.58 million
Number of common shares outstanding=190 million
Company’s stock price today (December 31, 2013)=(7681.58/190
)= $ 40.43