Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown...
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Accounting
Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2016 are as follows:
($ millions)
2017
2018
2019
2020
2021
Net Income
1.0
2.0
3.2
3.7
4.0
Investment
1.0
1.0
1.2
1.4
1.4
Free Cash Flow
0
1.0
2.0
2.3
2.6
Phoenix's recovery will be completed by 2021, and there will be no further growth in free cash flow.
a. Calculate the PV of free cash flow, assuming a cost of equity of 9%. (Do not round intermediate calculations.Enter your answer in millions rounded to 2 decimal places.)
b. Assume that Phoenix has 12 million shares outstanding. What is the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. If the net income for 2016 is $1 million, what is Phoenixs P/E ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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