Free cash flow has grown rapidly

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Reference no: EM13881180

Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made at the beginning of 2016 are as follows: ($ millions) 2017 2018 2019 2020 2021 Net income 1.0 2.0 3.2 3.7 4.0 Investment 1.0 1.0 1.2 1.4 1.4 Free cash flow 0 1.0 2.0 2.3 2.6 Phoenix’s recovery will be complete by 2021, and there will be no further growth in free cash flow.

a. Calculate the PV of free cash flow, assuming a cost of equity of 9%. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

Present value $ million

b. Assume that Phoenix has 12 million shares outstanding. What is the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Price per share $

c. What is Phoenix’s P/E ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

P/E ratio

Reference no: EM13881180

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