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ABC corp. faltered in the recent recession but is recovering. Free cash flow has grown...

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Finance

ABC corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2020 are as follows:

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ABC recovery will be complete by 2025, no further growth in net income or free cash flow is expected thereafter, it will remain constant. 1) Calculate the PV of the cash flow, assuming a cost of equity of 8% 2) Assume that ABC has 14 million shares outstanding. What is the price per share?

Thank you in advance.

2021 2022 2023 2024 2025 ($ millions) Net income Investment 1.0 2.0 3.2 3.7 4.0 1.0 1.0 1.2 1.4 1.4 Free cash flow 0.5 1.0 2.0 2.3 2.6

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