Question

Saban Ironworks most recent reported free cash flow was $419.5 million. You project that the FCF will grow at a constant rate of 8% forever. If Saban's WACC is 12%, the firm has $2,580.5 million in outstanding debt, no preferred stock, and 250 million shares of common stock, what is the intrinsic value per share of the common stock assuming the firm holds only operating assets

Answer 1

Answer:

On October 15, 2020, the board of directors of Ensor Materials Corporation approved a stock option plan for key executives. On January 1, 2021, 28 million stock options were granted, exercisable for 28 million shares of Ensor's $1 par common stock. The options are exercisable between January 1, 2024, and December 31, 2026, at 90% of the quoted market price on January 1, 2021, which was $10. The fair value of the 28 million options, estimated by an appropriate option pricing model, is $6 per option. Ensor chooses the option to recognize fonexpectedly to $26 per share.