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, $10 million, and $13 million. After the fourth year, free
cash flow is projected to grow at a constant 8%. Brandtly's WACC is
16%, the market value of its debt and preferred stock totals $60
million, the firm has $12 million in non-operating assets, and it
has 12 million shares of common stock outstanding.
- What is the present value of
the free cash flows projected during the next 4 years? Do not round
intermediate calculations. Round your answer to the nearest dollar.
Write out your answers completely. For example, 13 million should
be entered as 13,000,000.
$
- What is the firm's horizon, or
continuing, value? Round your answer to the nearest dollar. Write
out your answers completely. For example, 13 million should be
entered as 13,000,000.
$
- What is the market value of
the company's operations? Do not round intermediate calculations.
Round your answer to the nearest dollar. Write out your answers
completely. For example, 13 million should be entered as
13,000,000.
$
What is the firm's total market value today? Do not round
intermediate calculations. Round your answer to the nearest dollar.
Write out your answers completely. For example, 13 million should
be entered as 13,000,000.
$
- What is an estimate of
Brandtly's price per share? Do not round intermediate calculations.
Round your answer to the nearest cent.
$