What is the fair price for acme shares

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ACME Transmission Inc. is a tier 1 auto parts supplier. Analysts expected ACME to generate free cash flow of $2 billion in one year. Assume that cash flows occur on December 31 and today is January 1. Analysts expect the cash flows to grow at 2.5% in perpetuity. ACME has $9.5238 billion of debt, which is equal to 1/3rd of its value and it is committed to maintaining that ratio in perpetuity. The required return of shareholders is 12.5% and the required return of lenders is 5%. The tax rate is 30%. There are 2 billion shares outstanding. What is the fair price for ACME's shares? Round your answer to the nearest cent.

Reference no: EM133060110

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