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24 November, 05:02

Scampini Technologies is expected to generate $25 million in free cash flow next year, and FCF is expected to grow at a constant rate of 4% per year indefinitely. Scampini has no debt or preferred stock, its WACC is 10%, and it has zero non-operating assets. If Scampini has 40 million shares of stock outstanding, what is the stock's value per share?

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  1. 24 November, 05:30
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    The stock's value per share is $10.42

    Explanation:

    For:

    FCF1 = Expected cash flow of the firm

    = $25 million

    WACC = 10%

    g = 4%

    Firm value = FCF1 / (WACC - g)

    = 25,000,000 / (0.10 - 0.04)

    = $416,666,666.67

    We know that there is no debt & preferred stock, so the firm value will be equal to Equity value:

    Firm value = Equity value

    = $416,666,666.67

    stock value per share = Equity Value/No. of share outstanding

    = $416,666,666.67/40,000,000

    = $10.42 per share

    Therefore, The stock's value per share is $10.42
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