Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown...
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Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2019 are as follows: ($ millions) 2020 2021 2022 2023 2024 Net income 1.0.3.8 6.8 7.30 7.6 Investment 1.0 2.8 3.0 3.2 3.2 Eree cash flow 0 1.0 3.8 4.1 4.4 Phoenix's recovery will be complete by 2024, and there will be no further growth in net income or free cash flow. a. Calculate the PV of free cash flow, assuming a cost of equity of 10%. b. Assume that Phoenix has 15 million shares outstanding. What is the price per share? c. Confirm that the expected rate of return on Phoenix stock is exactly 10% in each of the years from 2020 to 2024. (Hint: First, calculate the PV of all future cash flows starting in each year. Round your answer to 2 decimal places.) Fac)
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