Hofmann Enterprises invests a lot of money in R&D, and as a result it retains and reinvests all of its earnings instead of paying dividends. A pension fund manager is interested in purchasing Hofmanns stock and has estimated its free cash flows for the next 3 years as follows: $2 million, $6 million, and $9 million. After the 3rd year, FCF is projected to grow at a constant 5 percent. Hofmanns WACC is 7 percent, its debt and preferred stock total $100 million, and it has 8 million shares of common stock outstanding. What is the value of Hofmanns stock price?

a.

$46.87

b.

$34.37

c.

$37.52

d.

$50.02

e.

$48.37