Free Cash Flow and Intrinsic Value of Stock
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Based on the information provided, calculate the intrinsic value in 2004 of a share of INV Corp. using the FCFF (free cash flow to the firm ) model. For 2004 the FCFF was $30,000, total debt was $20,000, and there were 12000 shares outstanding. The required rate of return is 9% and the estimated growth rate in FCFF is 6.5%.
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This solution helps answer question regarding free cash flow and the intrinsic value of stock.
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Intrinsic value of stock = Value of equity/Number of shares
Value of equity = Value of firm - value of debt
Value of firm = PV of free cash flows (FCFF)
In this case since ...
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