Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Brandtly does not pay any dividends, and it has no plans to pay dividends in the near future. A major pension fund is interested in purchasing Brandtly's stock. The pension fund manager has estimated Brandtly's free cash flows for the next 4 years as follows: $2 million, $7 million, $8 million, and $15 million. After the fourth year, free cash flow is projected to grow at a constant 8%. Brandtly's WACC is 13%, the market value of its debt and preferred stock totals $50 million, the firm has $12 million in non-operating assets, and it has 7 million shares of common stock outstanding. a. What is the present value of the free cash flows projected during the next 4 years? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000. 21996121 b. What is the firm's horizon, or continuing, value? Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000. 324000000 c. What is the market value of the company's operations? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000. 220711388 What is the firm's total market value today? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000. $ 219530000 d. What is an estimate of Brandtly's price per share? Do not round intermediate calculations. Round your answer to the nearest cent. $ 2.60
Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Brandtly does not pay any dividends, and it has no plans to pay dividends in the near future. A major pension fund is interested in purchasing Brandtly's stock. The pension fund manager has estimated Brandtly's free cash flows for the next 4 years as follows: $2 million, $7 million, $8 million, and $15 million. After the fourth year, free cash flow is projected to grow at a constant 8%. Brandtly's WACC is 13%, the market value of its debt and preferred stock totals $50 million, the firm has $12 million in non-operating assets, and it has 7 million shares of common stock outstanding. a. What is the present value of the free cash flows projected during the next 4 years? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000. 21996121 b. What is the firm's horizon, or continuing, value? Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000. 324000000 c. What is the market value of the company's operations? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000. 220711388 What is the firm's total market value today? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000. $ 219530000 d. What is an estimate of Brandtly's price per share? Do not round intermediate calculations. Round your answer to the nearest cent. $ 2.60
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
C and D is wrong. I need help please.
Transcribed Image Text:Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings.
In other words, Brandtly does not pay any dividends, and it has no plans to pay dividends in the near future. A
major pension fund is interested in purchasing Brandtly's stock. The pension fund manager has estimated
Brandtly's free cash flows for the next 4 years as follows: $2 million, $7 million, $8 million, and $15 million.
After the fourth year, free cash flow is projected to grow at a constant 8%. Brandtly's WACC is 13%, the market
value of its debt and preferred stock totals $50 million, the firm has $12 million in non-operating assets, and it
has 7 million shares of common stock outstanding.
a. What is the present value of the free cash flows projected during the next 4 years? Do not round intermediate
calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13
million should be entered as 13,000,000.
2$
21996121
b. What is the firm's horizon, or continuing, value? Round your answer to the nearest dollar. Write out your
answers completely. For example, 13 million should be entered as 13,000,000.
324000000
c. What is the market value of the company's operations? Do not round intermediate calculations. Round your
answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered
as 13,000,000.
$
220711388
What is the firm's total market value today? Do not round intermediate calculations. Round your answer to
the nearest dollar. Write out your answers completely. For example, 13 million should be entered as
13,000,000.
$
219530000
d. What is an estimate of Brandtly's price per share? Do not round intermediate calculations. Round your answer
to the nearest cent.
2.60
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