Question $3(4$ marks$)$

TTC Inc.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$\_("$const$.")=6\%.$

a$.$ If D$\_(0)=$$$1\mathrm{.}60$ and r$\_($s$)=10\%,$ what is TTC$\text{'}$s stock worth today? What are its expected dividend and capital gains yields at this time, that is$,$ during Year $1?$

b$.$ Suppose, a major pension fund, Barrett Industries, is interested in purchasing TTC$\text{'}$s stock. The pension fund manager has estimated TTC$\text{'}$s free cash flows $($FCF$)$ for the next $4$ years as follows: $$3$ million, $$6$ million, $$10$ million, and $$15$ million. After the fourth year, free cash flow is projected to grow at a constant $7\%.$ TTC$\text{'}$s WACC is $12\%,$ the market value of its debt and preferred stock totals $$60$ million, and it has $10$ million shares of common stock outstanding.

b$1.$ What is the present value of the free cash flows projected for TTC during the next $4$

years?

b$2.$ What is the firm's terminal value?

b$3.$ What is the firm's total value today?

b$4.$ What is an estimate of TTC$\text{'}$s price per share?