River Enterprises has $506 million in debt and 17 million shares of equity outstanding. Its excess cash reserves are $16 million. They are expected to generate $195 million in free cash flows next year with a growth rate of 2% per year in perpetuity. River Enterprises' weighted average cost of capital is 13%. 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 be if you are right? If the growth rate is 2%, the price per share is $ (Round to the nearest cent.)

River Enterprises has $506 million in debt and 17 million shares of equity outstanding. Its excess cash reserves are $16 million. They are expected to generate $195 million in free cash flows next year with a growth rate of 2% per year in perpetuity. River Enterprises' weighted average cost of capital is 13%. 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 be if you are right? If the growth rate is 2%, the price per share is $ (Round to the nearest cent.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 27P

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