Question 16 5 pt Beshan Technologies endofyear free cash flo

Question 16 5 pt Beshan Technologies\' end-of-year free cash flow (FCF) is expected to be $70 million, and free cash flow is expected to grow at a constant rate of 5% a year in the future. The firm\'s WACC is 10% and it has S600 lion of long-term debt and preferred stock. If the firm has 26 millon shares of common stock outstanding, what is the estimated intrinsic value per share of their common stock? Your answer should be between 14.20 and 68.54, rounded to 2 decimal places, with no special characters

Solution

Current total value of firm=FCF for next period/(WACC-Growth rate)

=70/(0.1-0.05)

=$1400 million

Less:Value of long term debt and preferred stock=$600million

Value of equity=$800million

Hence required intrinsic value=(800million/26million shares)

=$30.77(Approx).