Answer:
d. $34.87
Explanation:
We need to calcualte the value of the company. This is done by addingthe present vbalue of the future free cash flow of the firm.
FCF0 = 1.32 (current accounting period)
FCF 1.32 + 30% = 1.716
FCF2 FCF1 + 10% = 1.716 x 1.1 = 1.8876
FCF3 FCF + 5% = 1.8876 x 1.05 = 1.98198
From here after we use the gordon model:
WACC = 9%
grow = 5%
we use FCF instead of dividends: 1.98198
Value of the future cash flow 49,5495
Now, as this are in the future we must adjust using the present value of a lump sum:
PV 1.5743
PV 1.5888
PV 41.7048
Total: 1.5743 + 1.5888 + 41.7048 = 44,8679
Now we adjust for shrot term investment and debt outstanding:
vresent value of the future cash flow 44,8679
short term investment: 4.0000
debt outstanding <u> (14.000) </u>
Net: 34.8679