Problem:
A company generated free cash flow of $51 million last year and expects it to grow at a constant rate of 4% indefinitely. The company's weighted average cost of capital is 12%. The company has 25 million shares of outstanding stock, and the current price per share is $28.50.
Could you please do a step-by step (equation) process for each problem for learning purposes.
Calculate the company's free cash flow for next year.
Calculate the value of the company's operations.
Calculate the value of one share of the company's stock.
Is the company's stock a good buy? Explain?