Question - On January 1, 2016, shares of Company X trade at $6.50 per share, with 400 million shares outstanding. The company has net debt of $300 million. After building an earnings model for Company X, you have projected free cash flow for each year as follows:
|
Year
|
2016
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
|
FCF
|
110
|
120
|
150
|
170
|
200
|
250
|
280
|
Weighted average cost of capital - 10%
Long-term FCF growth rate - 3%
Estimate the present value of the projected free cash flows through 2022, discounted at the stated WACC. Assume all cash flows are generated at the end of the year (i.e., no mid-year adjustment):
A. $ 624.1 million
B. $ 1,117.8 million
C. $ 693.3 million
D. $ 837.0 million