Wilbur and Orville are brothers They 're both seriousinvestors, but t...

Wilbur and Orville are brothers.â€‹ They're both seriousâ€‹ investors, but they have different approaches to valuing...

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Finance

Wilbur and Orville are brothers.â€‹ They're both seriousâ€‹investors, but they have different approaches to valuing stocks.â€‹Wilbur, the olderâ€‹ brother, likes to use the dividend valuationmodel. Orville prefers the free cash flow to equity valuationmodel. As it turnsâ€‹ out, rightâ€‹ now, both of them are looking atthe same stock Wright Firstâ€‹ Aerodynmaics, Inc.â€‹ (WFA). The companyhas been listed on the NYSE for over 50 years and is widelyregarded as aâ€‹ mature, rock-solid,â€‹ dividend-paying stock. Thebrothers have gathered the following information aboutâ€‹ WFA'sstock:
Current dividend â€‹(Upper D 0â€‹)=â€‹$1.90â€‹/share
Current free cash flow â€‹(FCF 0â€‹)=$1.5 million
Expected growth rate of dividends and cash flows â€‹(gâ€‹)=8â€‹%
Required rate of return â€‹(râ€‹)=12â€‹%
Shares outstanding = 400,000 shares
How would Wilbur and Orville each value thisâ€‹ stock?
The stock price fromâ€‹ Wilbur's valuation is?
The stock price fromâ€‹ Orville's valuation is?

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Wilbur computation of valuation method is dividend valuation method which shall be computed as shown below Price Current Dividend 1 growth rate Required rate of return growth rate Current dividend 190 See Answer

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