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You have an option to buy Sears stock. Based on the released financial statements

You have an option to buy Sears stocks. Based on the released financial statements, they have $500 million of debt and 14 million shares of stock outstanding. You expect the Corporation to generate the following cash flows over the next five years

Year                              1                 2                  3                   4                  5

FCF($millions)     75               84               96               111             120

Beginning with year six, you estimate that the Corporation's free cash flows will grow at 6% per year and that their weighted average cost of capital is 15%.

Would you be willing to buy a share at the price $39? And why or why not?

May 19 2018 View more View Less

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