Question
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
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 | $5.9 | $14.2 | $22.6 | $43.4 | $71.4 | $83.5 | $105.9 | $125.8 | $144.5 | $161.7 |
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 $1,100 million, it uses no preferred stock, it has zero nonoperating assets; and there are 20 million of common stock outstanding. Use the corporate valuation model to value the stock. Round your answer to the nearest cent.
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