Franktown Motors is expected to have a free cash flow to the…
Franktown Motors is expected to have a free cash flow to the firm (FCFF) of $2 million next year (i.e., t=1). Its FCFF is expected to grow at 10 percent per year for another year (i.e., till t=2). After that (i.e., since t=2), the free cash flow to the firm is expected to grow at 3 percent indefinitely. The firm currently has $12 million in debt and 750,000 shares outstanding. The company’s weighted average cost of capital (WACC) is 8 percent. What is the price per share of the company’s stock based on the Free Cash Flow Model?
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