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Barrett Industries invests a lot of money in R&D, and as a result it retains and reinvests all of its earnings. In other words, Barrett
Barrett Industries invests a lot of money in R&D, and as a result it retains and reinvests all of its earnings. In other words, Barrett does not pay any dividends, and it has no plans to pay dividends in the near future. A major pension fund is interested in purchasing Barrett's stock. The pension fund manager has estimated Barrett's free cash flows for the next 4 years as follows: $2 million, $6 million, $10 million, and $14 million. After the 4th year, free cash flow is projected to grow at a constant 8%. Barrett's WACC is 10%, its debt and preferred stock total to $18 million, and it has 12 million shares of common stock outstanding. a. What is the present value of the free cash flows projected during the next 4 years? Round your answer to two decimal places at the end of the calculations. Enter your answer in millions. For example, an answer of $25,120,000 should be entered as $25.12. b. What is the firm's terminal value? Round your answer to two decimal places at the end of the calculations. Enter your answer in millions. For example, an answer of $25,120,000 should be entered as $25.12. c. What is the firm's total value today? Round your answer to two decimal places at the end of the calculations. Enter your answer in millions. For example, an answer of $25,120,000 should be entered as $25.12. d. What is an estimate of Barrett's price per share? Round your answer to two decimal places at the end of the calculations
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