Assume that today is December 31, 2000 and that the following information applies to Vermeil Airlines:
A. After-tax operating income [EBIT(1-t)] for 2001 is expected to be $500 million.
B. The company’s depreciation expense for 2001 is expected to be $100 million.
C. The company’s capital expenditures for 2001 are expected to be $200 million
D. No change is expected in the company’s net operating working capital.
E. The company’s free cash flow is expected to grow at a constant rate of 6 percent per year.
F. The company’s cost of equity is 14 percent.
G. The company’s WACC is 10 percent.
H. The market value of the company’s debt is $3 billion.
I. The company has 200 million shares of stock outstanding.
Using the free cash flow approach, what should the company’s stock price be today?