You must estimate the intrinsic value of Tsetseko Technologies' stock.Tsetseko's end-of-year free cash flow (FCF) is expected to be $17.50 million,and it is expected to grow at a constant rate of 7.00% a year thereafter.The company's WACC is 10.00%.Tsetseko has $125.00 million of long-term debt plus preferred stock,and there are 15.00 million shares of common stock outstanding.What is Tsetseko's estimated intrinsic value per share of common stock?

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To estimate the intrinsic value per share of Tsetseko Technologies' stock, we use the Gordon Growth Model (a version of the Dividend Discount Model for a perpetually growing dividend) since the free cash flow (FCF) is expected to grow at a constant rate. The formula for the model is:$$ \text{Value} = \frac{\text{FCF} \times (1 + g)}{WACC - g} $$where:- FCF is the end-of-year free cash flow,- $g$ is the growth rate of the FCF,- WACC is the Weighted Average Cost of Capital.Given:- FCF = $17.50 million,- $g$ = 7.00% or 0.07,- WACC = 10.00% or 0.10.Plugging the values into the formula:$$ \text{Value} = \frac{17.50 \times (1 + 0.07)}{0.10 - 0.07} = \frac{17.50 \times 1.07}{0.03} = \frac{18.725}{0.03} = 624.17 \text{ million} $$This is the total value of the firm's equity. To find the intrinsic value per share, we first need to subtract the value of long-term debt and preferred stock from the total value to get the value of common equity, and then divide by the number of shares outstanding.The value of equity available to common shareholders is:$$ \text{Equity Value} = \text{Total Value} - \text{Debt and Preferred Stock} = 624.17 - 125 = 499.17 \text{ million} $$The intrinsic value per share is:$$ \text{Value per Share} = \frac{\text{Equity Value}}{\text{Shares Outstanding}} = \frac{499.17}{15} = 33.28 $$However, since this result does not match any of the provided options and the calculation method outlined is correct for the given approach, it seems there might have been a misunderstanding in the calculation or the interpretation of the options. Given the options provided, none directly match the calculated result, suggesting a need to reevaluate the calculation or the options provided. The correct approach involves using the Gordon Growth Model to estimate the total value of the firm, subtracting the value of debt and preferred stock, and dividing by the number of shares outstanding to find the intrinsic value per share. The discrepancy indicates a possible error in the calculation steps as per the options given.

You Must Estimate the Intrinsic Value of Tsetseko Technologies' Stock