Business, 18.11.2020 17:30 ilovesummertime207

Huxley Building Supplies' last free cash flow was $1.75 per share . Its free cash flow growth rate is expected to be constant at 25% for 2 years, after which free cash flows are expected to grow at a rate of 6% forever. WACC is 12%. Huxley has $5 in short-term investments per share and $7 debt per share. What is the best estimate of the current intrinsic stock price?

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Answer from: shubbs1038a

$40.6344 per share

Explanation:2.

Complete question "Huxley has $5 million in short-term investments and $7 million in debt and has 1 million shares outstanding. What is the best estimate of the current intrinsic stock price?"

Calculation of the value of firm is as below

Yr Cash flow Growth rate New c.flow Pv at 12% Pv of cash flows

1 1.75 25% 2.1875 0.893 1.9534

2 2.1875 25% 2.7344 0.797 2.1793

TCM 48.3083 0.797 38.5017

Value of firm 42.6344

Note: TCM = Terminal cash floe = 2.7344*(1.06) / 12% - 6% = 48.3083 million

Now, Market value of firm = 42.6344 + 5 - 7 = 40.6344 million

Market price per share = $40.6344 million/1 million = $40.6344 per share

Answer from: Quest

The business cycle is the periodic but irregular up-and-down movement in economic activity, measured by fluctuations in real gross domestic product (gdp) and other macroeconomic variables. a business cycle is typically characterized by four phases—recession, recovery, growth, and decline—that repeat themselves over time. economists note, however, that complete business cycles vary in length. the duration of business cycles can be anywhere from about two to twelve years, with most cycles averaging six years in length. some business analysts use the business cycle model and terminology to study and explain fluctuations in business inventory and other individual elements of corporate operations. but the term "business cycle" is still primarily associated with larger (industry-wide, regional, national, or even international) business trends.

Answer from: Quest

none

explanation:

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