Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown...
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Phoenix Corp. faltered in the recent recession but is recovering. Free cash flow has grown rapidly. Forecasts made in 2016 are as follows:
| ($ millions) | 2017 | 2018 | 2019 | 2020 | 2021 |
| Net Income | 1.0 | 2.0 | 3.2 | 3.7 | 4.0 |
| Investment | 1.0 | 1.0 | 1.2 | 1.4 | 1.4 |
| Free Cash Flow | 0 | 1.0 | 2.0 | 2.3 | 2.6 |
Phoenix's recovery will be completed by 2021, and there will be no further growth in free cash flow.
a. Calculate the PV of free cash flow, assuming a cost of equity of 9%. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
b. Assume that Phoenix has 12 million shares outstanding. What is the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. If the net income for 2016 is $1 million, what is Phoenixs P/E ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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