Calculate the estimated value of common equity

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Problem - Watkins Inc. has never paid a dividend, and when the firm might begin paying dividends is not known. Its current free cash flow is $100,000, and this FCF is expected to grow at a constant 7% rate. The weighted average cost of capital is WACC = 11%. Watkins currently holds $325,000 of nonoperating marketable securities. Its long-term debt is $1,000,000, but it has never issued preferred stock. Watkins has 50,000 shares of stock outstanding.

Required -

a. Calculate Watkins's value of operations.

b. Calculate the company's total value.

c. Calculate the estimated value of common equity.

d. Calculate the estimated per share stock price.

Reference no: EM132734472

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