Nonconstant Growth and Corporate Valuation $**$ CORRECT ANY ANSWERS THAT NEED TO BE CORRECTED PLEASE $**$Taussig Technologies Corporation $($TTC$)$ has been growing at a rate of $20\%$ per year in recent years. This same growth rate is expected to last for another $2$ years, then

decline to $g_n=5\%.$

The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round

intermediate calculations.

Download spreadsheet Nonconstant Growth and Corporate Valuation$-40$d$09$e$.$xlsx

a$.$ If $D_0=$$$1\mathrm{.}80$ and $r_s=8\%,$ what is TC$\text{'}$s stock worth today? Round your answer to the nearest cent.

$

$94$

per share

What are its expected dividend, and capital gains yields at this time, that is$,$ during Year $1?$ Round your answers to two decimal places.

Dividend yield:

$2\mathrm{.}28$

Capital gains yield:

b$.$ Now assume that TCC$\text{'}$s period of supernormal growth is to last for $5$ years rather than $2$ years. How would this affect the price, dividend yield, and capital gains

yield? Round your answer for the price to the nearest cent and for the dividend yield and capital gains yield to two decimal places.

The price will

to $

$?16$

per share.

The dividend yield will

decrease $2$

decrease $$

to

to

$2\mathrm{.}59$

$\%.$

$\%$

The capital gains yield will increase

to

$.72\%$

$!.72$

$\%$

$\%$

c$.$ What will TTC$\text{'}$s dividend and capital gains yields be once its period of supernormal growth ends? $($Hint: These values will be the same regardless of whether you

examine the case of $2$ or $5$ years of supernormal growth; the calculations are very easy.$)$ Round your answers to two decimal places.

Dividend yield:

$\%$

Capital gains yield:

$\%$

d$.TC$ recently introduced a new line of products that has been wildly successful. On the basis of this success and anticipated future success, the following free cash

flows weI

Year

FCF

After the $10$th year, TCC$\text{'}$s financial planners anticipate that its free cash flow will grow at a constant rate of $5\%.$ Also, the firm concluded that the new product

caused the WACC to fall to $7\%.$ The market value of TC$\text{'}$s debt is $$1,500$ million, it uses no preferred stock, it has zero nonoperating assets; and there are $25$

million of common stock outstanding. Use the corporate valuation model to value the stock. Round your answer to the nearest cent.