A company generated free cash flow of $51 million last year and expects it to grow at a constant rate of 4 percent indefinitely. The company's weighted average cost of capital is 12 percent. The company has 25 million shares of outstanding stock, and the current price per share is $28.50.
a. Calculate the company's free cash flow for next year
b. Calculate the value of the company's operations
c. Calculate the value of one share of the company's stock.
d. Is the company's stock a good buy? Explain
The solution explains how to determine the free cash flow and the stock price with calculations and answers in an attached Excel file.