Portage Bay Enterprises has $ 1 million in excess cash, no debt, and is expected to have free cash flow of $9 million next year. Its FCF is then expected to grow at a rate of 3% per year forever. If Portage Bay's equity cost of capital is 13% and it has 8 million shares outstanding, what should be the price of Portage Bay stock?

Portage Bay Enterprises has $ 1 million in excess cash, no debt, and is expected to have free cash flow of $9 million next year. Its FCF is then expected to grow at a rate of 3% per year forever. If Portage Bay's equity cost of capital is 13% and it has 8 million shares outstanding, what should be the price of Portage Bay stock?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 15P

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