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Fingerprint Cards is a software development company that specializes in electronic systems that read fingerprints. You have read a lot about the company on various online forums over the past year and therefore you are considering whether it can be a good investment to buy 1000 shares in the company. The company's shares are sold at SEK 29.50 per share. To facilitate your decision, you have found out that the company’s liabilities amounted to SEK 1400 million, cash and cash equivalents to SEK 100 million and the company has 200 million shares outstanding. You expect that the company will generate 300 million in free cash flows in 2016, 500 million in free cash flows in 2017 and that the free cash flows then will grow by 5% per year. The company's cost of debt is 7% after tax and its cost of equity is 13%.

Make an assessment based on the information above about what you believe that the company's stock is worth. Also, if your assessment of the company’s share value is correct, how much would you earn/lose in case you were investing in the company (here you do not have to take into account any eventual taxes)?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M91774702

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