You Have Been Assigned the Task of Using the Corporate,or

question 66

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:

Unique Situation

A scenario or circumstance that is distinct from others, often requiring specialized handling or consideration.

Organisational Design

Organisational design involves the process of aligning an organization's structure and processes with its objectives to enhance efficiency, adaptability, and overall performance.

Premise

An initial statement or proposition from which conclusions are drawn or arguments are based.

Strategy

A plan of action designed to achieve a long-term or overall aim, often involving the deployment of resources in a competitive context.