AutoSave OH HUB FIN300-Exam 2 TH(S) - Word O Search Alyssa Scott AS File Home Insert Draw Design Layout References Mailings Review View Help Share Comments 32) Suppose you work as an Equity Research Analyst for the Teachers' Retirement Pension Fund. Your fund is offered to purchase TechRevolution public offering at $3.50 per share. While your fund's manager is very interested in this stock, he also wants to make sure the fund pays a fair price per share, so he asked you to determine the fundamental price of the firm's stock. Using various sources, you gathered the following information about TechRevolution (12.5 points total): Year 2021 2022 2023 2024 Free cash flow (FCF forecast), $ 700,000 735,000 765,000 790,000 Other data FCF growth rate (2023 to 0) = 2% per year Weighted average cost of capital = 13% per year Market value of company's debt = $3,000,000 Market value of preferred stock = $0 Common shares outstanding = 1,100,000 a) Use the discounted free cash flow valuation approach to estimate the company's price per share. Make sure to find the value of terminal free cash flow and include it in your calculations (10 points). b) Given the price you found in part (a) and the asking price per share, should you buy this company's stocks? Explain why yeso (2.50 points). Page 3 of 6 875 words Accessibility: Investigate : Focus BE Ee 100% 1 Type here to search o E: 52F 3 A 40 3:28 PM 11/4/2021 AutoSave OH HUB FIN300-Exam 2 TH(S) - Word O Search Alyssa Scott AS File Home Insert Draw Design Layout References Mailings Review View Help Share Comments 32) Suppose you work as an Equity Research Analyst for the Teachers' Retirement Pension Fund. Your fund is offered to purchase TechRevolution public offering at $3.50 per share. While your fund's manager is very interested in this stock, he also wants to make sure the fund pays a fair price per share, so he asked you to determine the fundamental price of the firm's stock. Using various sources, you gathered the following information about TechRevolution (12.5 points total): Year 2021 2022 2023 2024 Free cash flow (FCF forecast), $ 700,000 735,000 765,000 790,000 Other data FCF growth rate (2023 to 0) = 2% per year Weighted average cost of capital = 13% per year Market value of company's debt = $3,000,000 Market value of preferred stock = $0 Common shares outstanding = 1,100,000 a) Use the discounted free cash flow valuation approach to estimate the company's price per share. Make sure to find the value of terminal free cash flow and include it in your calculations (10 points). b) Given the price you found in part (a) and the asking price per share, should you buy this company's stocks? Explain why yeso (2.50 points). Page 3 of 6 875 words Accessibility: Investigate : Focus BE Ee 100% 1 Type here to search o E: 52F 3 A 40 3:28 PM 11/4/2021