You Have Been Assigned the Task of Using the Corporate

question 29

Multiple Choice

You have been assigned the task of using the corporate, or free cash flow, model to estimate Petry Corporation's intrinsic value. The firm's WACC is 10.00%, its end-of-year free cash flow (FCF1) is expected to be $75.0 million, the FCFs are expected to grow at a constant rate of 5.00% a year in the future, the company has $200 million of long-term debt and preferred stock, and it has 30 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock?

• A) $40.35
• B) $41.82
• C) $43.33
• D) $44.85
• E) $46.42

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Definitions:

Third Restatement

The Third Restatement refers to updated versions of the American Law Institute's restatements on various areas of law, providing a contemporary summary of common law principles.

Principal Goes Bankrupt

When a principal goes bankrupt, it refers to a situation where the main party in a financial or business agreement is unable to repay debts and legally declares bankruptcy.

Discharge

The act of formally releasing someone from their duties, often used in the context of employment termination.

Dismissal

The act of officially removing someone from their job, often due to inadequate performance, misconduct, or redundancy.