It is 2021. You are investigating the possibility of making an equity investment in Walkerville...
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It is 2021. You are investigating the possibility of making an equity investment in Walkerville Woodworking Inc., a firm that specializes in producing antique-style furniture with a modern twist. Your research has revealed the following information: . Walkerville has $8 million in excess cash and $4.5 million in debt. The company is expected to have free cash flow of $25 million in 2022 and $35 million in 2023. Beyond 2023, free cash flow is expected to grow at a constant rate of 2% per year forever. Walkerville's weighted average cost of capital (WACC) is 11% and it has 8 million shares outstanding. Question A: (5 points) What is the current enterprise value of Walkerville Woodworking given the above assumptions? A. $376.37 million B. $372.87 million C. $346.44 million D. $411.41 million E. $338.15 million Question B: (5 points) What should be the price of one share of Walkerville stock? A. $43.31 B. $41.83 C. $46.17 D. $51.86 E. $47.05
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