The discounted cash flow (DCF) model can be used to assess the current share price of Hailey Corporation .Therefore, the current share price is $92.60.
What is discount cash flow model?
The discount cash flow model is a way of valuing a company that determines the present value of its future cash flows. The dividends that Hailey Corporation will pay to its stockholders over the following ten years are the future cash flows in this example.
The formula for the Discount cash flow model is:
PV = Σ (CFj / (1 + r)^j)
Where:
PV denotes the cash flow's present value.
CFj is the year's cash flow, r is the needed rate of return, and j is the year.
In this instance, we know:
CFj = $13.70 for j = 1 to 10
For j = 11 to infinity, CFj = $0, and r = 10%.
When we enter these values into the formula, we get:
PV = $13.70 [(1 - (1 + 10%)^-10) / 10%]
PV = $92.60
As a result, Hailey Corporation's current share price is $92.60.