. What is Growth- Tech stock worth now under this assumption? (Make additional assumptions if necessary) 24. DCF and free cash flow Compost Science, Inc. (CSI), is in the business of converting Boston's only its cost of capital on any investments made in year 4 or subsequently sewage sludge into fertilizer. The business is not in itself very profitable. However, to induce CS to remain in business, the Metropolitan District Commission (MDC) has agreed to pay what- ever amount is necessary to yield CSI a 10% book return on equity. At the end of the year CSI is expected to pay a $4 dividend. It has been reinvesting 40% of earnings and growing at 4% a year. a. Suppose CSI continues on this growth trend. What is the expected long-run rate of return from purchasing the stock at $100? What part of the $100 price is attributable to the pres ent value of growth opportunities? b. Now the MDC announces a plan for CSI to treat Cambridge sewage. CSI's plant will. therefore, be expanded gradually over five years. This means that CSI will have to reinvest 80% of its earnings for five years. Starting in year 6, however, it will again be able to pay out 60% of earnings. What will be CSI's stock price once this announcement is made and its consequences for CSI are known? ian Partners (PP) produces from aging oil fields in west ining at 7% per 25. DCF and free cash flow Permi Texas. Production is 1.8 million barrels per year in 2016, but production is decl future. Costs of production, transportation, and administration year for the foreseeable up to $25 pe r barrel. The average oil price was $65 per barrel in 2016 7 million shares outstanding. The cost of capit al is 9%. All of PP's net income is PP has distributed as dividends. simplicit ever and that costs per barrel are constant at $25. Al a. What is the ending 2016 PP share For simplicity, assume that the company will stay in business for- value of one PP share? Assume that oil prices are expected to fall 2019. After 2019 so to $60 per barrel in 2017, S55 per barrel in 201 assume a long-term trend and $50 per barrel in 20 of oil-price increases at 5% per year cost of b. What is PP's EPS/P ratio and why is it not equal to h capital? sh flow Construct a new version of Table 43