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What is the intrinsic value of the stock

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ABC currently produces annual free cash flow of 5 billion a year. The company has long-term debt of $10 billion and Cash and Marketable Securities of $25 billion. Given that the stock currently trades in the marketplace at $50 and that there are 2 billion shares outstanding, at what rate is the market factoring in for FCF growth assuming that the stock is correctly valued and that the FCF will grow constantly next year and beyond. Use a WACC of 8% for your calculation. Secondly, assume that FCF is going to grow at 6% for the next 3 years as they introduce new products and that in year 4 and beyond the FCF will grow at 1%. What is the intrinsic value of the stock given this new information? Comment on your findings.

 

 

Reference no: EM132680531

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