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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
New Millenium Company earned $2.1 million in net income last year. It took depreciation deductions of $305,000 and made new investments in working capital and fixed assets of $102,000 and $346,000 respectively.
a. What was New Millenium's free cash flow last year?
b. Suppose that the company's free cash flow is expected to grow at 5% per year forever. If investors require a return of 8% on Millenium stock, what is the present value of Millenium's future free cash flows?
c. New Millenium has 3.1 million shares of common stock outstanding. What is the per-share value of the company's common stock?
d. What is the company's P/E ratio based on last year's earnings (i.e., trailing earnings)?
e. What is the company's P/E ratio based on next year's earnings (assuming that earnings grow at the same rate as free cash flow).
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