According to the value-based management model, what is the stock price per share given the following data?
|
Year
|
|
1
|
|
Revenue
|
|
700.00
|
|
Other income
|
|
25.00
|
|
Fixed costs
|
|
90.00
|
|
Variable costs
|
|
280.00
|
|
Additional investment in NWC
|
|
3.00
|
|
Additional investment in operating long-term assets
|
|
80.00
|
|
Depreciation
|
|
75.00
|
|
|
|
|
|
Tax rate
|
0.40
|
|
The free cash flow is expected to grow at 8% from year 1 to year 5 and 6% after year 5 to infinity. WACC comp = 20%.
|
Market value of the firm:
|
|
|
|
|
|
Price per share
|
Number of shares
|
Market value
|
|
Long-term debt
|
|
|
700.00
|
|
Preferred stock
|
7.00
|
10
|
70.00
|
|
Common stock, equity
|
15.00
|
100
|
1,500.00
|
|
Total
|
|
|
2,270.00
|
Market value of non-operating short-term assets=50
Market value of non-operating long-term assets=80
Select one:
a. $7.22
b. $8.54
c. $6.90
d. $9.97
e. $5.68