Hill Corp. is expected to have the following free cash flow:

Year	1	2	3	4
FCF	13	15	16	17	Grow by 3% per year

a. Hill Corp. has

6

million shares outstanding,

$3

million in excess cash, and it has no debt. If its cost of capital is

13%,

what should be its stock price?

b. Hill Corp. adds its FCF to cash, and has no plans to add debt. If you plan to sell Hill Corp. at the beginning of year 2, what is its expected price?

c. Assume you bought Hill Corp. stock at the beginning of year 1. What is your expected return from holding Hill Corp. stock until year 2?

a. Hill Corp. has

6

million shares outstanding,

$3

million in excess cash, and it has no debt. If its cost of capital is

13%,

what should be its stock price?The stock price should be

$nothing.

(Round to the nearest cent.)

b. Hill Corp. adds its FCF to cash, and has no plans to add debt. If you plan to sell Hill Corp. at the beginning of year 2, what is its expected price?

If you plan to sell Hill Corp at the beginning of year 2, its price should be

$nothing.

(Round to the nearest cent.)

c. Assume you bought Hill Corp. stock at the beginning of year 1. What is your expected return from holding Hill Corp. stock until year 2?

Your expected return from holding Hill Corp. stock until the beginning of year 2 is

nothing%.

(Round to one decimal place.)