4. The multi-stage valuation model Aa Aa Consider the case of Purple Panda Pharmaceuticals in Purple Panda Pharmaceuticals Inc. is expected to generate a free cash flow (FCF) of $725,000 this year, and the FCF is expected to grow at a rate of 20% over the following two years (FCF2 and FCF3). After the third year, however, the company's FCFs are expected to grow at a constant rate of 9% per year, which will last forever (FCF4..). If Purple Panda's weighted average cost of capital (WACC) is 18%, complete the following table and compute the current value of Purple Panda's operations. Round all dollar amounts to the nearest whole dollar, and assume that the firm does not have any nonoperating assets in its balance sheet and that all FCFs occur at the end of each year. CF PV(FCF) $725,000 Year FCF, FCF2 FCF FCF4 Horizon Value - Purple Panda's debt has a market value of $7,177,626, and Purple Panda has no preferred stock in its capital structure. If Purple Panda has 400,000 shares of common stock outstanding, then the total value of the company's common equity is and the estimated Intrinsic value per share of its common stock is per share. Assume the following: . The end of Year 3 differentiates Purple Panda's short-term and long-term FCF's. Professionally conducted studies have shown that more than 80% of the average company's share price is attributable to long-term rather than short-term-cash flows. Is the percentage of Purple Panda's expected long-term cash flows consistent with the value cited in the professional studies? No, because only 68.57% of the firm's share price is derived from its expected long-term free cash flows. Yes, because 0.41% of the firm's share price is derived from its expected long-term free cash flows No, because the percentage of Purple Panda's expected long-term cash rows is actualy 19.59% Yes, because 20.76% of the firm's share price is derived from its expected long-term free cash nows