Calculate the pv of free cash flow

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Reference no: EM131990760

Problem - Valuing free cash flow

Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made at the beginning of 2016 are as follows:

($ millions)	2017	2018	2019	2020	2021
Net income	1.0	3.3	5.8	6.3	6.6
Investment	1.0	2.3	2.5	2.7	2.7
Free cash flow	0	1.0	3.3	3.6	3.9

Phoenix's recovery will be complete 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 10%. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

Present value $ million

b. Assume that Phoenix has 10 million shares outstanding. What is the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Price per share $

c. What is Phoenix's P/E ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

P/E ratio

Reference no: EM131990760

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