Quantitative Problem 2

I’m working on a Accounting exercise and need support.

Hadley Inc. forecasts the year-end free cash flows (in millions) shown below.

Year 1 2 3 4 5
FCF -$22.7 $38.2 $43.5 $51.6 $56.9

The weighted average cost of capital is 10%, and the FCFs are expected to continue growing at a 5% rate after Year 5. The firm has $25 million of market-value debt, but it has no preferred stock or any other outstanding claims. There are 19 million shares outstanding. Also, the firm has zero non-operating assets. What is the value of the stock price today (Year 0)? Round your answer to the nearest cent. Do not round intermediate calculations.
$


per share

According to the valuation models developed in this chapter, the value that an investor assigns to a share of stock is dependent on the length of time the investor plans to hold the stock.

The statement above is true or false?

 
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