3.

Horizon Value of Free Cash Flows

JenBritt Incorporated had a free cash flow (FCF) of $82 million in 2019. The firm projects FCF of $260 million in 2020 and $610 million in 2021. FCF is expected to grow at a constant rate of 6% in 2022 and thereafter. The weighted average cost of capital is 9%. What is the current (i.e., beginning of 2020) value of operations? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to two decimal places.

$ million

4.

Nonconstant Dividend Growth Valuation

A company currently pays a dividend of $3.6 per share (D₀ = $3.6). It is estimated that the company's dividend will grow at a rate of 15% per year for the next 2 years, and then at a constant rate of 8% thereafter. The company's stock has a beta of 1.6, the risk-free rate is 9.5%, and the market risk premium is 6.5%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.

$

6.

Value of Operations

Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 8%. The company's weighted average cost of capital is 15%.

1. What is the terminal, or horizon, value of operations? (Hint: Find the value of all free cash flows beyond Year 2 discounted back to Year 2.) Round your answer to the nearest cent.

   $

2. Calculate the value of Kendra's operations. Do not round intermediate calculations. Round your answer to the nearest cent.

   $