What is the current value of a single share

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Question - McKenzie, Inc. reported an EBIT of $15.75 million last year. Depreciation expense totaled $5 million. McKenzie invested $4.5 million in (long-term) capital expenditures and increased networking capital by $2.4 million. Free cash flow is expected to grow at a rate of 2.5% into perpetuity. McKenzie faces a 40% tax rate and has a 0.50 debt to equity ratio with $30.1 million (market value) in debt outstanding. McKenzie's equity beta is 1.4, the risk-free rate is currently 3% and the market risk premium is estimated to be 7.5%. McKenzie has 10 million shares of common stock outstanding. What is the asset (unlevered) beta for McKenzie, Inc.? Using the calculated asset beta, calculate McKenzie's appropriate discount rate (i.e., cost of capital, k) to use in the Free Cash Flow (FCF) model. What is McKenzie's free cash flow (FCF) for the past year? Use the Discounted Free Cash Flow (FCF) model to find the value of the firm (i.e., the present value of the firm's operations)? What is the current value of a single share of McKenzie stock? Assume there are no short-term investments or non-operating cash.

Reference no: EM132917239

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