Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Brandtly

Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Brandtly 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 Brandtly's stock. The pension fund manager has estimated Brandtly's free cash flows for the next 4 years as follows: $4 million, $6 million, $9 million, and $13 million. After the fourth year, free cash flow is projected to grow at a constant 7%. Brandtly's WACC is 9%, the market value of its debt and preferred stock totals $68 million, the firm has $14 million in non-operating assets, and it has 11 million shares of common stock outstanding. The present value of the free cash flows projected during the next 4 years is $24,878,984, and the firm's horizon value is $695,500,000. A) What is the market value of the company's operations to the nearest dollar? B) What is the firm's total market value today to the nearest dollar? C) What is an estimate of Brandtly's price per share, to the nearest cent? Do not round intermediate calculations.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Take The Trade A Floor Trade

Authors: Tony Wilson

1st Edition

979-8218195458

More Books

Students also viewed these Finance questions