Assume that today is December 31, 2019, and that the following information applies to Abner Airlines: After-tax...

50.1K

Verified Solution

Question

Finance

Assume that today is December 31, 2019, and that the followinginformation applies to Abner Airlines:
After-tax operating income [EBIT(1 - T)] for 2020 is expected tobe $500 million.
The depreciation expense for 2020 is expected to be $190million.
The capital expenditures for 2020 are expected to be $225million.
No change is expected in net operating working capital.
The free cash flow is expected to grow at a constant rate of 5% peryear.
The required return on equity is 15%.
The WACC is 9%.
The firm has $202 million of non-operating assets.
The market value of the company's debt is $3.462 billion.
230 million shares of stock are outstanding.
Using the corporate valuation model approach, what should be thecompany's stock price today? Do not round intermediatecalculations. Round your answer to the nearest cent.
$

Answer & Explanation Solved by verified expert

4.4 Ratings (866 Votes)

Step1 Free Cash Flow FCF Free Cash Flow FCF Net Operating Profit After TaxNOPAT Depreciation Expenses Capital Expenditures Changes in Net Working Capital EBIT1 Tax Rate See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Assume that today is December 31, 2019, and that the followinginformation applies to Abner Airlines:After-tax operating income [EBIT(1 - T)] for 2020 is expected tobe $500 million.The depreciation expense for 2020 is expected to be $190million.The capital expenditures for 2020 are expected to be $225million.No change is expected in net operating working capital.The free cash flow is expected to grow at a constant rate of 5% peryear.The required return on equity is 15%.The WACC is 9%.The firm has $202 million of non-operating assets.The market value of the company's debt is $3.462 billion.230 million shares of stock are outstanding.Using the corporate valuation model approach, what should be thecompany's stock price today? Do not round intermediatecalculations. Round your answer to the nearest cent.$