Firm estimated intrinsic value per share of common stock

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1. Sorensen Systems Inc. is expected to pay a $2.50 dividend at year end (D1= $2.50), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $52.50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity. What is the company’s WACC?

2. You must estimate the intrinsic value of Noe Technologies’ stock. The end-of-year free cash flow (FCF1) is expected to be $27.50 million, and it is expected to grow at a constant rate of 7.0% a year thereafter. The company’s WACC is 10.0%, it has $125 million of long-term debt, and there are 15 million shares of common stock outstanding. What is the firm’s estimated intrinsic value per share of common stock?

Reference no: EM132067016

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