You have been assigned the task of using the free cash flow model to estimate Pe

Question

You have been assigned the task of using the free cash flow model to estimate Petry Corporation's intrinsic value. Petry's WACC is 10.00%, its end-of-year free cash flow (FCF) is expected to be $150.0 million, the FCFs are expected to grow at a constant rate of 6.00% a year in the future, the company has $200 million of long-term debt plus preferred stock, and it has 50 million shares of common stock outstanding. What is Petry's estimated intrinsic value per share of common stock?

a.
$66.12
b.
$68.52
c.
$71.00
d.
$73.49
e.
$76.06

Explanation / Answer

Total firm value = $1000 Total firm value - debt = 1000-200 = $800 Thus calculating for Intrinsic value per share of common stock we get, c. $71.00

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