10. Corporate valuation model The corporate valuation model, the price-to-earnings (P/E) multiple approach, and the economic value added (EVA) approach are some examples of valuation techniques. The corporate valuation model is similar to the dividend-based valuation that you've done in previous problems, but it focuses on a firm's free cash flows (FCFS) instead of its dividends. Some firms don't pay dividends, or their dividends are difficult to forecast. For that reason, some analysts use the corporate valuation model. Tropetech Inc. has an expected net operating profit after taxes, EBIT(1-T), of $2,400 million in the coming year. In addition, the firm is expected to have net capital expenditures of $360 million, and net operating working capital (NOWC) is expected to increase by $45 million. How much free cash flow (FCF) is Tropetech Inc. expected to generate over the next year? $2,085 million O$43,481 million $2,715 million O $1,995 million Tropetech Inc.'s FCFS are expected to grow at a constant rate of 3.90% per year in the future. The market value of Tropetech Inc.'s outstanding debt is $11,510 million, and its preferred stocks' value is $6,394 million. Tropetech Inc. has 675 million shares of common stock outstanding, and its weighted average cost of capital (WACC) equals 11.70%. O X Term Value (Millions) Total firm value Intrinsic value of common equity Intrinsic value per share Using the preceding information and the FCF you calculated in the previous question, calculate the appropriate values in this table. Assume the firm has no nonoperating assets. 9. Stocks that don't pay dividends yet Goodwin Technologies, a relatively young company, has been wildly successful but has yet to pay a dividend. An analyst forecasts that Goodwin is likely to pay its first dividend three years from now. She expects Goodwin to pay a $1.50000 dividend at that time (D, $1.50000) and believes that the dividend will grow by 7.80000 % for the following two years (D, and D.). However, after the fifth year, she expects Goodwin's dividend to grow at a constant rate of 3.42000% per year. Goodwin's required return is 11.40000 %. Fill in the following chart to determine Goodwin's horizon value at the horizon date (when constant growth begins) and the current intrinsic value. To increase the accuracy of your calculations, do not round your intermediate calculations, but round all final answers to two decimal places. Term Value Horizon value Current intrinsic value and Goodwin's capital gains yield Assuming that the markets are in equilibrium, Goodwin's current expected dividend yield is Goodwin has been very successful, but it hasn't paid a dividend yet. It circulates a report to its key investors containing the following statement: Goodwin has a large selection of profitable investment opportunities. RS, do not round your intermediate calculations, but round all final answers to two decimal places. Term Value Horizon value Current intrinsic value $22.59 Assuming that the markets librium, Goodwin's current expected dividend yield is and Goodwin's capital gains yield $19.20 is $27.11 Goodwin has been very suc it hasn't paid a dividend yet. It circulates a report to its key investors containing the following statement: $15.81 Goodwin has a large selection of profitable investment opportunities. Is this statement a possible explanation for why the firm hasn't paid a dividend yet? No Yes Term Value Horizon value Current intrinsic value Assuming that the markets $8.15 librium, Goodwin's current expected dividend yield is and Goodwin's capital gains yield is $16.32 Goodwin has been very suc it hasn't paid a dividend yet. It circulates a report to its key investors containing the following statement: $15.23 $16.77 Goodwin has a large selection of profitable investment opportunities. Is this statement a possible explanation for why the firm hasn't paid a dividend yet? No Yes 2 Term Value Horizon value Current intrinsic value Assuming that the markets are in equilibrium, Goodwin's current expected dividend yield is 9.19% Goodwin has been very successful, but it hasn't paid a dividend yet. It circulates a report to 9.91% 0.00% Goodwin has a large selection of profitable investment opportunities. 7.72% Is this statement a possible explanation for why the firm hasn't paid a dividend yet? No Yes , and Goodwin's capital gains yield is vestors containing the following statement: Term Value Horizon value Current intrinsic value Assuming that the markets are in equilibrium, Goodwin's current expected dividend yield is and Goodwin's capital gains yield is 16.32% en very successful, but it hasn't paid a dividend yet. It circulates a report to its key investors containing the following statement: 22.59% 11.40000% s a large selection of profitable investment opportunities. 13.1671% Is this statement a possible explanation for why the firm hasn't paid a dividend yet? No Yes Goodwin has a large selection of profitable investment opportunities. Is this statement a possible explanation for why the firm hasn't paid a dividend yet? O No Yes