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Wilbur and Orville are brothers.​ They're both serious​ investors, but they have different approaches to valuing...

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Finance

Wilbur and Orville are brothers.​ They're both serious​investors, but they have different approaches to valuing stocks.​Wilbur, the older​ brother, likes to use the dividend valuationmodel. Orville prefers the free cash flow to equity valuationmodel. As it turns​ out, right​ now, both of them are looking atthe same stock Wright First​ Aerodynmaics, Inc.​ (WFA). The companyhas been listed on the NYSE for over 50 years and is widelyregarded as a​ mature, rock-solid,​ dividend-paying stock. Thebrothers have gathered the following information about​ WFA'sstock:

Current dividend ​(Upper D 0​)=​$1.90​/share

Current free cash flow ​(FCF 0​)=$1.5 million

Expected growth rate of dividends and cash flows ​(g​)=8​%

Required rate of return ​(r​)=12​%

Shares outstanding = 400,000 shares

How would Wilbur and Orville each value this​ stock?

The stock price from​ Wilbur's valuation is?

The stock price from​ Orville's valuation is?

Answer & Explanation Solved by verified expert
4.1 Ratings (801 Votes)
Wilbur computation of valuation method is dividend valuation method which shall be computed as shown below Price Current Dividend 1 growth rate Required rate of return growth rate Current dividend 190    See Answer
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