What should be the company stock price today

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Question 1: Assume today is December 31, 2016. Barrington Industries expects that its 2017 after-tax operating income [EBIT(1 - T)] will be $450 million and its 2017 depreciation expense will be $65 million. Barrington's 2017 gross capital expenditures are expected to be $120 million and the change in its net operating working capital for 2017 will be $25 million. The firm's free cash flow is expected to grow at a constant rate of 5% annually. Assume that its free cash flow occurs at the end of each year. The firm's weighted average cost of capital is 8.7%; the market value of the company's debt is $2.95 billion; and the company has 170 million shares of common stock outstanding. The firm has no preferred stock on its balance sheet and has no plans to use it for future capital budgeting projects. Using the free cash flow valuation model, what should be the company's stock price today (December 31, 2016)?

Reference no: EM132861537

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