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Click here to read the eBook: Enterprise-Based Approach to Valuation Problem Walk-Through CORPORATE VALUE MODEL Assume that today is December 31, 2016, and that the following inforrmation applies to Abner Airlines: After-tax operating income [EBITC1 T)] for 2017 is expected to be $600 million The depreciation expense for 2017 is expected to be $90 million. . The ?(ital expenditures for 2017 are expected to be $375 million. No change is expected in net operating working capital. The free cash flow is expected to grow at a constant rate of 6% per year. The required return on equity is 15%. The WACC is 9%. . The market value of the company's debt is $3 billion. 180 million shares of stock are outstanding. Using the corporate valuation model approach, what should be the company's stock price today? Round your answer to the nearest cent. Write out your answer completely. For example, 0.00013 million should be entered as 130. 69.44 Hide Feedback correct

Explanation / Answer

Free cash flow in 2017=600+90-375=315 million
Value of firm=(315*(1+6%))/(9%-6%)=11130 million
COmmon stock=11130-3000=8130 million
Stock price today=8130/180=45.167

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