Answered step by step
Verified Expert Solution
Link Copied!

Question

00
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

image text in transcribed
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: $3 million, $5 million, $8 million, and $14 million. After the fourth year, free cash flow is projected to grow at a constant 7%. Brandtly's WACC is 13%, the market value of its debt and preferred stock totals $78 million, the firm has $16 million in non-operating assets, and it has 12 million shares of common stock outstanding. a. What is the present value of the free cash flow projected during the next 4 years? Do not round intermediate calculations, Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000. b. What is the firm's horizon, or continuing, value? Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000 C. What is the market value of the company's operations? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000 What is the firm's total market value today? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000. d. What is an estimate of Brandtly's price per share? Do not round intermediate calculations. Round your answer to the nearest cent

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Basic Business Statistics Concepts And Applications

Authors: Mark L. Berenson, David M. Levine, Timothy C. Krehbiel

12th Edition

9780132168380

Students also viewed these Finance questions