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Sagot :
The current stock price of Knightmare incorporated is $22.93
The net amount of cash and cash equivalents coming into and going out of a business is referred to as cash flow. Money spent and money received reflect inflows and outflows, respectively. Fundamentally, a company's capacity to produce positive cash flows, or more specifically, its capacity to maximize long-term free cash flow, determines its ability to create value for shareholders.
To determine the stock price we need to discount the three cash flows:
cash flow 1 = $5.75
cash flow 2 = $9.85
cash flow 3 = $13.05
discount rate = required rate of return = 10.5%
stock price = CF1 / (1 + r) + CF2 / (1 + r)² + CF3 / (1 + r)³
= $5.75 / (1 + 0.105) + $9.85 / (1 + 0.105)² + $13.05 / (1 + 0.105)³
= $5.75 / 1.105 + $9.85 / 1.105² + $13.05 / 1.105³
= $5.20 + $8.06 + $9.67 = $22.93
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