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 cb7705 xlsx If D 0 $1 20 and r s 8 , what is TTC's stock worth today Round your answer to the nearest cent $ fill in the blank 2 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 fill in the blank 3 Capital gains yield fill in the blank 4 Now assume that TTC'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 increase decrease to $ BLANK per share The dividend yield will increase decrease to BLANK The capital gains yield will increase decrease to fill in the BLANK What will TTC'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 fill in the blank Capital gains yield fill in the blank TTC 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 were projected (in millions) Year 1 2 3 4 5 6 7 8 9 10 FCF $5 0 $12 6 $28 6 $47 4 $63 6 $86 6 $106 1 $127 4 $143 4 $157 7 After the 10th year, TTC'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 TTC's debt is $1,000 million, it uses no preferred stock, it has zero nonoperating assets and there are 40 million of common stock outstanding Use the corporate valuation model to value the stock Round your answer to the nearest cent $ BLANK per share

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Oct 06, 2024

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

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-cb7705.xlsx

If D₀ = $1.20 and r_s = 8%, what is TTC's stock worth today? Round your answer to the nearest cent.

$ fill in the blank 2 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: fill in the blank 3 %

Capital gains yield: fill in the blank 4 %
Now assume that TTC'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 increase / decrease to $ BLANK per share. The dividend yield will increase / decrease to BLANK %. The capital gains yield will increase / decrease to fill in the BLANK %.
What will TTC'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: fill in the blank %

Capital gains yield: fill in the blank %
TTC 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 were projected (in millions):

Year 1 2 3 4 5 6 7 8 9 10

FCF $5.0 $12.6 $28.6 $47.4 $63.6 $86.6 $106.1 $127.4 $143.4 $157.7

After the 10th year, TTC'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 TTC's debt is $1,000 million, it uses no preferred stock, it has zero nonoperating assets; and there are 40 million of common stock outstanding. Use the corporate valuation model to value the stock. Round your answer to the nearest cent.

$ BLANK per share