Answer:
d. $34.87
Explanation:
We need to calcualte the value of the company. This is done by addingthe present vbalue of the future free cash flow of the firm.
FCF0 = 1.32 (current accounting period)
FCF 1.32 + 30% = 1.716
FCF2 FCF1 + 10% = 1.716 x 1.1 = 1.8876
FCF3 FCF + 5% = 1.8876 x 1.05 = 1.98198
From here after we use the gordon model:
[tex]\frac{divends}{return-growth} = Intrinsic \: Value[/tex]
WACC = 9%
grow = 5%
we use FCF instead of dividends: 1.98198
[tex]\frac{1.98198}{0.09-0.05} = Intrinsic \: Value[/tex]
Value of the future cash flow 49,5495
Now, as this are in the future we must adjust using the present value of a lump sum:
[tex]\frac{1.716}{(1 + 0.09)^{1} } = PV[/tex]
PV 1.5743
[tex]\frac{1.8876}{(1 + 0.09)^{2} } = PV[/tex]
PV 1.5888
[tex]\frac{49.5495}{(1 + 0.09)^{2} } = PV[/tex]
PV 41.7048
Total: 1.5743 + 1.5888 + 41.7048 = 44,8679
Now we adjust for shrot term investment and debt outstanding:
vresent value of the future cash flow 44,8679
short term investment: 4.0000
debt outstanding (14.000)
Net: 34.8679
