Vandell’s free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 5% a year; its beta is 1.4. What is the value of Vandell’s operations? If Vandell has $10.82 million in debt, what is the current value of Vandell’s stock? (Hint: Use the corporate valuation model).

FCF1 FCF2 FCF3 FCF

Value = ---------------- + --------------- + ------------- + ……… + -----------------

(1+WACC) 1 (1+WACC) 2 (1+WACC) 3 (1+WACC)

FCF1 FCF2 FCF3 FCF

Value = ---------------- + --------------- + ------------- + ……… + -----------------

(1+WACC) 1 (1+WACC) 2 (1+WACC) 3 (1+WACC)

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Vandells free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate

of 5% a year; its beta is 1.4. What is the value of Vandells...