Question
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.
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