(Solution) - Grande Hotel Limited GHL is expected to generate free cash -(2025 Original AI-Free Solution)

Discipline:

Type of Paper:

Academic Level: Undergrad. (yrs 3-4)

Paper Format: APA

Pages: 5 Words: 1375

Download Solution ($11.00) Write My Paper Afresh

Buy For $11.00

Paper Details

Grande Hotel Limited (GHL) is expected to generate free cash flows of $500,000 next year. Free cash flow will increase at an annual rate of $250,000 for Years 2 to 4 after which it will stabilize at $1.2 million per year from Years 5 to 10. GHL's cost of capital is 5%. Long-term debt is $3 million. There are 1.5 million shares outstanding. The annual dividend per share is $0.30.
Required:
Estimate the market price of the common shares for GHL using the:
(a) Dividend valuation method
(b) The free cash flow method.