3. Suppose that you are trying to value the stock of a company that just generated $35 million in free cash flow, and that these cash flows are expected to grow by 6% next year, 4% the year after, and finally settles down to 2% per annum. Suppose further you have estimated its cost of capital of the firm to be 9%. Assuming that the firm has $130 million in debt outstanding, $320 million in preferred stock outstanding, and $60 million in non-operating assets, what is your best estimate of the market capitalization of the firm? If the firm has 9.5 million shares issued and outstanding, what is your best estimate of the appropriate share price?

4. When a firm decides to pay a dividend, what are the principal drivers behind this decision?

5. What are the three major drivers of valuation?