Discounted Cash Flow Valuation Presented below are data for Rom Com Truck: Forecast Year 1 2 3 4 5 Terminal No. of outstanding shares 500 500 500 500 500 500 Terminal...

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Accounting

Discounted Cash Flow Valuation
Presented below are data for Rom Com Truck:
Forecast Year
1 2 3 4 5 Terminal
No. of outstanding shares 500 500 500 500 500 500
Terminal year growth rate 4%
Cost of common equity 10% 10% 10% 10% 10% 10%
Net income $79 $94 $111 $130 $150 $157
Beginning of year common equity $649 $683 $720 $758 $797 $839
Free cash flow to common equity $44 $58 $73 $90 $108 $115
Compute the value of a share of Rom Com common stock using thediscounted cash flow method.
Do not round your computations until your final answer. Roundfinal answer to two decimal places.
$????

	Forecast Year
No. of outstanding shares	500	500	500	500	500	500
Terminal year growth rate						4%
Cost of common equity	10%	10%	10%	10%	10%	10%
Net income	$79	$94	$111	$130	$150	$157
Beginning of year common equity	$649	$683	$720	$758	$797	$839
Free cash flow to common equity	$44	$58	$73	$90	$108	$115

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4.1 Ratings (807 Votes)

A B C D E F G H I J K L M 2 3 To calculate the value of common stock the free cash flow to equity should be discounted at cost of equity 4 The present value of the free cash flow to equity will be the value of the common stock 5 6 Forecast Year See Answer

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	Forecast Year
	1	2	3	4	5	Terminal
No. of outstanding shares	500	500	500	500	500	500
Terminal year growth rate						4%
Cost of common equity	10%	10%	10%	10%	10%	10%
Net income	$79	$94	$111	$130	$150	$157
Beginning of year common equity	$649	$683	$720	$758	$797	$839
Free cash flow to common equity	$44	$58	$73	$90	$108	$115