Discounted Cash Flow Valuation
Presented below are data for Rom Com Truck:
| Forecast Year | |
|---|
| 1 | 2 | 3 | 4 | 5 | Terminal |
|---|
| No. of outstanding shares | 500 | 500 | 500 | 500 | 500 | 500 |
| Terminal year growth rate | | | | | | 4% |
| Cost of common equity | 10% | 10% | 10% | 10% | 10% | 10% |
| Net income | $79 | $94 | $111 | $130 | $150 | $157 |
| Beginning of year common equity | $649 | $683 | $720 | $758 | $797 | $839 |
| Free cash flow to common equity | $44 | $58 | $73 | $90 | $108 | $115 |
Compute the value of a share of Rom Com common stock using thediscounted cash flow method.
Do not round your computations until your final answer. Roundfinal answer to two decimal places.
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