You must estimate the intrinsic value of Noe Technologies' stock.The end-of-year free cash flow (FCF₁)is expected to be $27.50 million,and it is expected to grow at a constant rate of 7.0% a year thereafter.The company's WACC is 10.0%,it has $125.0 million of long-term debt plus preferred stock outstanding,and there are 15.0 million shares of common stock outstanding.What is the firm's estimated intrinsic value per share of common stock? A)$48.64 B)$50.67 C)$52.78 D)$54.89 E)$57.08

Question

Quizplus · Accepted Answer

The intrinsic value per share is calculated using the formula for the value of a growing perpetuity: Value = FCF1 / (WACC - growth rate). Here, Value = $27.50 million / (0.10 - 0.07) = $916.67 million. Subtract the long-term debt and preferred stock: $916.67 million - $125.0 million = $791.67 million. Divide by the number of shares: $791.67 million / 15.0 million shares = $52.78 per share.

You Must Estimate the Intrinsic Value of Noe Technologies' Stock