Using corporate valuation model approach

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Reference no: EM132008864

You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $2.75 a share at the end of the year (D1 = $2.75) and has a beta of 0.9. The risk-free rate is 3.3%, and the market risk premium is 4.0%. Justus currently sells for $46.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is ?) Round your answer to two decimal places. Do not round your intermediate calculations.

Assume that today is December 31, 2016, and that the following information applies to Abner Airlines:

After-tax operating income [EBIT(1 - T)] for 2017 is expected to be $700 million.

The depreciation expense for 2017 is expected to be $80 million.

The capital expenditures for 2017 are expected to be $325 million.

No change is expected in net operating working capital.

The free cash flow is expected to grow at a constant rate of 5% per year.

The required return on equity is 16%.

The WACC is 9%.

The market value of the company's debt is $4 billion.

200 million shares of stock are outstanding.

Using the corporate valuation model approach, what should be the company's stock price today? Round your answer to the nearest cent. Write out your answer completely. For example, 0.00013 million should be entered as 130. $

Reference no: EM132008864

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