Jitte Corporation estimates that over the next four years, its free cash flows are expected to be $4.4 million in Year 1, $6.3 million in Year 2, $8.5 million in Year 3, and $10.4 million in Year 4. After that, the corporation expects its free cash flows to grow at a constant rate of 4% for the foreseeable future. In addition to the free cash flow generated from its operations, the corporation has $4.7 million in short-term investments. The corporation owes $50 million in debt obligations to its bondholders and $20 million in dividends to its preferred stockholders. The corporation has 20 million shares of common stock outstanding, and its weighted average cost of capital is 12.5%.
1. What is the firm’s horizon value of free cash flows at the end of Year 4?
2. What is the value generated from the firm’s operations?
3. How much of the firm’s value is available for distribution to its common stockholders?
4. Based on the free cash flow valuation model, what should the intrinsic value of the
corporation’s common stock be today?

Use the following information
Umezawa Inc. estimates that over the next three years, its dividends are expected to grow by 30% from Year 0 to Year 1, 20% from Year 1 to Year 2, and 10% from Year 2 to Year 3. After that, the corporation believes that its dividends will grow at a constant rate of 6% indefinitely. For its most recent fiscal period, the corporation paid out dividends of $5.75 per share. The corporation has a beta of 1.5, the current risk-free rate of return is 4.9%, and the expected return on the market portfolio is 14.3%.
5. Based on the CAPM, what is the required return on the corporation’s common stock?
6. What is the expected price of the stock at the end of Year 3?
7. Based on the dividend valuation model, what should the intrinsic value of the corporation’s
common stock be today?