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Business, 10.08.2021 02:40 edgarnino13

On January 1. 2014, shares of Company X trade at $6.50 per share, with 400 million shares outstanding. The company has net debt of $300 million. After building an earnings model for Company x you have projected free cash flow for each year through 2014 as follows: Year 2014 2015 2016 2017 2018 2019 2020
Free Cash 110 120 150 170 200 250 280
Flow
You estimate that the weighted average cost of capital (WACC) for Company X is 10% and assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020, the final projected year. According to the discounted cash flow valuation method, Company X shares are:.
a. $0.13 per share undervalued
b. S0.23 per share overvalued
c. $0.83 per share overvalued
d. $0.83 per share

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On January 1. 2014, shares of Company X trade at $6.50 per share, with 400 million shares outstandin...
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