Please don't use Ai solution 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 paydividends 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: $3million, $6 million, $8 million, and $16 million. After the fourth year, free cash flow is projected to grow at a constant 3%. Brandtly's WACC is 9%, the market value of its debt and preferred stock totals$75 million, the firm has $15 million in non-operating assets, and it has 7.5 million GROUP WORKGROUP WORK a)-What is the present value of the free cash flows projected during the next 4 years?b)-What is the firm's horizon, or continuing, value? c)-What is the market value of the company's operations? What is the firm's total market value today? d)-What is an estimate of Brandtly's priceper share Describe the step by step using a fin calc. not just the answers and include Time Lines on each question to be able to receive a full grade.

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Answered: Brandtly Industries invests a large sum…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter23: Other Topics In Working Capital Management

Section: Chapter Questions

Problem 11MC

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Company B's board is meeting to decide how to pay out $20 million in excess cash to shareholders. The company has 10 million shares outstanding, no debt, faces an equity cost of capital = WACC = 12%, and expects to generate future free cash flows of $48 million per year forever that will be paid out to shareholders as dividends each period. Calculate each shareholders' wealth if the company decides to pay out the $20 million excess cash immediately by repurchasing stock. ( Hint: shareholder wealth = value of equity holding plus cash from repurchase.)
Kohwe Corporation plans to issue equity to raise $50 million to finance a new investment. After making the investment, Kohwe expects to earn free cash flows of $10 million each year. Kohwe currently has 5 million shares outstanding, and has no other assets or opportunities. Suppose the appropriate discount rate for Kohwe's future free cash flows is 8%, and the only capital market imperfections are corporate taxes and financial distress costs. a. What is the NPV of Kohwe's investment? b. What is Kohwe's share price today? Suppose Kohwe borrows the $50 million instead. The finn will pay interest only on this loan each year, and maintain an outstanding balance of $40 million on the loan. Suppose that Kohwe's corporate tax rate is 35%, and expected free cash flows are still $9 million each year. c. What is Kohwe's share price today if the investment is financed with debt? Now suppose that with leverage, Kohwe's expected free cash flows wiH decline to $8 million per year due…
Kohwe Corporation plans to issue equity to raise $50.7 million to finance a new investment. After making the investment, Kohwe expects to earn free cash flows of $10.4 million each year. Kohwe's only asset is this investment opportunity. Suppose the appropriate discount rate for Kohwe's future free cash flows is 7.7%, and the only capital market imperfections are corporate taxes and financial distress costs. a. What is the NPV of Kohwe's investment? b. What is the value of Kohwe if it finances the investment with equity? a. What is the NPV of Kohwe's investment? The NPV of Kohwe's investment is $ million. (Round to two decimal places.) b. What is the value of Kohwe if it finances the investment with equity? The Kohwe finances stment with equity $ million. (Round decimal places.)
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The Generic Genetic (GG) Corporation pays no cash dividends currently and is not expected to for the next four years. Its latest EPS was $6.20, all of which was reinvested in the company. The firm's expected ROE for the next four years is 19% per year, during which time it is expected to continue to reinvest all of its earnings. Starting in year 5, the firm's ROE on new investments is expected to fall to 18% per year. GG's market capitalization rate is 18% per year. a. What is your estimate of GG's intrinsic value per share? (Round your answer to 2 decimal places.) GG's intrinsic value b. Assuming its current market price is equal to its intrinsic value, what do you expect to happen to its price over the next year? Price should at a rate of % over the next year.
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