What is the value of a share of bore

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-Boring, Inc. (Ticker: BORE) had net income (profits) of $400 million in 2021 on sales of $3 billion. The company is in a steady-state with capital expenditures just offsetting depreciation and operating working capital constant. Moreover, free cash flow is expected to grow at 5% forever. BORE is un-levered and has a cost of equity equal to 13%. There are 150 million shares of stock outstanding.

-What is the value of a share of BORE based on a WACC valuation?

-Now suppose that, in lieu of what's depicted above, BORE currently makes no profits and isn't expected to until 2026 (in 5 years). What is the value of a share of BORE stock based on a WACC valuation (assuming that the 2026 net income will be $400 million and after 2026 free cash flow will grow forever at 5%)? Note: you should still assume that CAPX = Depreciation and operating WC is constant.

Reference no: EM133057587

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