Intermediate Accounting II, after doing my calculations I am still getting the w
ID: 2453568 • Letter: I
Question
Intermediate Accounting II, after doing my calculations I am still getting the wrong amount for price per share.
Please help.There seems to be a problem with me uploading my work so, I can show the formula I used and the results.Let me see if I can copy and paste. OK, this is what figures I calculated. Thank you,Sharon
YR 1 YR 2 YR 3 YR 4 YR 5
FREE CASH FLOW 3500 4375 5469 6836 8545
ANNUAL GROWTH 875 1094 1367 1709
TOTAL (Free Cash Flow) 4375 + 5469 + 6836 + 8545 present value of 71,208
TOTAL PV= 25,225
8545/.012=71,208 value of perpetuity
Not Sure how to discount the present value back in to get the per share amount. Outstanding shares 3000/?
Present values
YR1 YR2 YR3 YR4
0.8929 0.7972 0.7118 0.6355
4375*0.8929=3906
5469*0.7972=4360
6836*0.7118=4866
8545*0.6355=5430
Equity Valuation Using Discounted Free Cash Flow The following information has been collected regarding Burton Dee Company: .. $3,500 25% ....3,000 Annual growth rate in free cash flow over the past five years . . . . . . . . . . .. . . . . . . . .. . Required rate of return on equity capital Length of time until terminal year......... Estimate a price per share for Burton Dee's stock using the discounted free cash flow model. Round all intermediate calculations to the nearest whole dollar, and round the final per share answer to the nearest cent. Click here to access the PV table to use with this problem. 12% .....4 years $23.74Explanation / Answer
Solution:
= 3,500 - 0 / 3,000
= 1.1666
OR
= 3,500 - 0 / 3,000 * 100
= 116.666
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