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What is the best estimate for the share price of cowbell

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Reference no: EM132770219

Problem 1: It is January 2021 and you are trying to value the stock of Cowbell Inc. using a free cash flow model. The firm currently has 5 million shares outstanding, a market value of debt of $300 million and no excess cash. You estimate that the firm's free cash flow at the end of the year will be $80 million. You also assume that free cash flows will continue to grow at a rate of 2% each year in perpetuity. The firm's weighted average cost of capital (WACC) is 10%. Given this information, what is the best estimate for the share price of Cowbell?

Select one.

I. $140

II. $200

III. $120

IV. $160

V. $100

Reference no: EM132770219

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