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Using the corporate valuation model approach

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Reference no: EM131332753

Assume that today is December 31, 2015, and that the following information applies to Vermeil Airlines:

- After-tax operating income [EBIT (1-T)] for 2016 is expected to be $500 million.

- The depreciation expense for 2016 is expected to be $100 million.

- The capital expenditures for 2016 are expected to be $200 million.

- No change is expected in networking capital.

- The free cash flow is expected to grow at a constant rate of 6% per year.

- The required return on equity is 14%.

- The WACC is 10%.

- The market value of the company’s debt is $5 billion.

- 200 million shares of stock are outstanding.

Using the corporate valuation model approach, what should be the company’s stock price today?

A) $25

B) $20

C) $18

D) $23

E) $28

Reference no: EM131332753

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