phb company currently sells for 32 50 per share in an attempt to determine if phb is 543657
PHB Company currently sells for $32.50 per share. In an attempt to determine if PHB is fairly priced, an analyst has assembled the following information:
- The before-tax required rates of return on PHB debt, preferred stock, and common stock are 7.0 percent, 6.8 percent, and 11.0 percent, respectively.
- The company”s target capital structure is 30 percent debt, 15 percent preferred stock, and 55 percent common stock.
- The market value of the company”s debt is $145 million, and its preferred stock is valued at $65 million.
- PHB”s FCFF for the year just ended is $28 million. FCFF is expected to grow at a constant rate of 4 percent for the foreseeable future.
- The tax rate is 35 percent.
- PHB has 8 million outstanding common shares.
What is PHB”s estimated value per share? Is PHB”s stock underpriced?
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