Answer:
Explanation:
The computation is shown below:
The free cash flow is
= Expected net operating profit after taxes - net capital expenditure - net operating working capital
= $2,400 million - $360 million - $45 million
= $1,995 million
Now the total firm value is
= Free cash flow ÷ (cost of capital - growth rate)
= $1,995 million ÷ (11.70% - 3.90% )
= $1,995 million ÷ 7.8%
= $25,576.92 million
Now the intrinsic value of equity is
= Total firm value - outstanding debt - preferred stock
= $25,576.92 million - $11,510 million - $6,394 million
= $7,672.92 million
And, the intrinsic value per share
= $7,672.92 million ÷ 675 million shares
= $11.37 per share
