River enterprises has 500 million in debt and 20 million, Ask an Expert

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River Enterprises has $500 million in debt and 20 million shares of equity outstanding. Its excess cash reserves are $15 million. They are expected to generate $200 million in free cash flows next year with a growth rate of 2% per year in perpetuity. River Enterprises’ cost of equity capital is 12% per year in perpetuity. After analyzing the company, you believe that the growth rate should be 3% instead of 2%. How much higher (in dollars) would the price per share of stock be if you are right?

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Financial Management, Finance

Category:- Financial Management
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