Market value in debt outstanding

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McKenzie, Inc. reported net income of $10 million for last year. Depreciation expense totaled $5 million and capital expenditures came to $2 million. Free cash flow is expected to grow at a rate of 2% for the foreseeable future. McKenzie faces a 40% tax rate and has a 0.50 debt to equity ratio with $20 million (market value) in debt outstanding. McKenzie's equity beta is 1.4, the risk- free rate is currently 5% and the market risk premium is estimated to be 7.5%. McKenzie has 10 million shares of common stock outstanding. What is the current value of a share of McKenzie stock?

Reference no: EM131865101

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