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, $6 million, $11 million, and $15 million. After the fourth year, free cash flow is projected to grow at a constant 3%. Brandtly's WACC is 10%, the market value of its debt and preferred stock totals $74 million, the firm has $15 million in nonoperating 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. $ 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. $ 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. $ 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. $ d. What is an estimate of Brandtly's price per share? Do not round intermediate calculations. Round your answer to the nearest cent.
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, $6 million, $11 million, and $15 million. After the fourth year, free cash flow is projected to grow at a constant 3%. Brandtly's WACC is 10%, the market value of its debt and preferred stock totals $74 million, the firm has $15 million in nonoperating 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. $ 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. $ 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. $ 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. $ d. What is an estimate of Brandtly's price per share? Do not round intermediate calculations. Round your answer to the nearest cent.
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
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, $6 million, $11 million, and $15 million. After the fourth year, free cash flow is projected to grow at a constant 3%. Brandtly's
WACC is 10%, the market value of its debt and preferred stock totals $74 million, the firm has $15 million in nonoperating 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.
$
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.
$
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.
$
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.
$
d. What is an estimate of Brandtly's price per share? Do not round intermediate calculations. Round your answer to the nearest cent.
$
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education