Acme Medical Corp. is expecting the cash flows from 2018-2022 in the table below. After 2022 it is expecting growth in cash flow at an annual rate of...

Acme Medical Corp. is expecting the cash flows from 2018-2022 in the table below. After 2022 it is expecting growth in cash flow at an annual rate of 3%. The firm has determined that its weighted average cost of capital (discount rate) is 7%. Using the table below calculate the following:

What is the present value of Acme's future cash flows using the discounted cash flow model?

If the firm has 200,000 common shares outstanding, zero preferred shares, and debt with a market value of $10,000,000 what would be the value of each share?

Now suppose the discount rate increases to 10%. How would your answers to a) and b) above change based on the new discount rate?

Year

Cash flow

2018

500,000

2019

550,000

2020

620,000

2021

700,000

2022

800,000