Explore BrainMass

Explore BrainMass

    Using the free cash flow approach, what should the company's stock price be today? (Harrison Corporation)

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Using the free cash flow approach, what should the company's stock price be today?
    Today is December 31, 2002. The following information applies to Harrison Corporation:
    -After-tax operating income [EBIT(1-T)] for 2003 is expected to be $950
    -The company's depreciation expense for 2003 is expected to be $190 million
    -The company's capital expenditures for 2003 are expected to be $380 million
    -No change is expected in the company's net operating working capital
    -The company's free cash flow is expected to grow at a constant rate of 4% per year
    -The company's cost of equity is 13%
    -The company's WACC is 9%
    -The market value of the company's debt is $5.2 billion
    -The company has 250 million shares of stock outstanding

    © BrainMass Inc. brainmass.com June 3, 2020, 6:17 pm ad1c9bdddf
    https://brainmass.com/business/cash/54033

    Solution Preview

    +950 After-tax operating income
    +190 depreciation expense
    -380 capital expenditures
    +0 change in net operating working capital
    -----------
    760 Free Cash Flow ...

    Solution Summary

    You will find the answer to this puzzling question inside...

    $2.19

    ADVERTISEMENT