Present Value of the Free Cash Flows Projected Assignment | Homework For You
Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Brandtly does not pay any dividends, and it has no plans to pay dividends in the near future. A major pension fund is interested in purchasing Brandtly’s stock. The pension fund manager has estimated Brandtly’s free cash flows for the next 4 years as follows: $4 million, $5 million, $9 million, and $16 million. After the fourth year, free cash flow is projected to grow at a constant 5%. Brandtly’s WACC is 10%, the market value of its debt and preferred stock totals $64 million; and it has 12 million shares of common stock outstanding.
Write out your answers completely. For example, 13 million should be entered as 13,000,000.
- What is the present value of the free cash flows projected during the next 4 years? Round your answer to the nearest cent. Do not round your intermediate calculations.
$
- What is the firm’s horizon, or continuing, value? Round your answer to the nearest cent.
$
- What is the firm’s total value today? Round your answer to the nearest cent. Do not round your intermediate calculations.
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- What is an estimate of Brandtly’s price per share? Round your answer to the nearest cent. Do not round your intermediate calculations. Get Finance homework help today
