Author Question: You have been assigned the task of using the free cash flow model to estimate Petry Corporations ... (Read 98 times)

Gabby · **on:** Aug 7, 2023

Question 1

You are considering buying a zero growth stock. If the firm pays a $6 annual dividend, and your required rate of return is 6%, what is the maximum price you would pay for this stock?

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$100

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$105

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$110

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$115

Question 2

You have been assigned the task of using the free cash flow model to estimate Petry Corporation’s intrinsic value. Petry’s WACC is 11.5%, its end-of-year free cash flow (FCF) is expected to be $176 million, the FCFs are expected to grow at a constant rate of 7% a year in the future, the company has $240 million of long-term debt plus preferred stock, and it has 61 million common shares outstanding. What is Petry’s estimated intrinsic value per common share?

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$59.20

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$60.18

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$60.95

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$71.32

miro2222 · **Reply #1 on:** Aug 7, 2023

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