TTC Inc. has been growing at a rate of 20% per year in recent years. This same growth rate is expected to last for another 2 years, then decline to g const. = 6%. If D0 = $1.60 and rs = 10%, what is TTC’s stock worth today? What are its expected dividend and capital gains yields at this time, that is, during Year 1? Suppose, a major pension fund, Barrett Industries, is interested in purchasing TTC’s stock. The pension fund manager has estimated TTC’s free cash flows (FCF) for the next 4 years as follows: $3 million, $6 million, $10 million, and $15 million. After the fourth year, free cash flow is projected to grow at a constant 7%. TTC’s WACC is 12%, the market value of its debt and preferred stock totals $60 million, and it has 10 million shares of common stock outstanding. b1. What is the present value of the free cash flows projected for TTC during the next 4 years? b2. What is the firm’s terminal value? b3. What is the firm’s total value today? b4. What is an estimate of TTC's price per share?

TTC Inc. has been growing at a rate of 20% per year in recent years. This same growth rate is expected to last for another 2 years, then decline to g const. = 6%. If D0 = $1.60 and rs = 10%, what is TTC’s stock worth today? What are its expected dividend and capital gains yields at this time, that is, during Year 1? Suppose, a major pension fund, Barrett Industries, is interested in purchasing TTC’s stock. The pension fund manager has estimated TTC’s free cash flows (FCF) for the next 4 years as follows: $3 million, $6 million, $10 million, and $15 million. After the fourth year, free cash flow is projected to grow at a constant 7%. TTC’s WACC is 12%, the market value of its debt and preferred stock totals $60 million, and it has 10 million shares of common stock outstanding. b1. What is the present value of the free cash flows projected for TTC during the next 4 years? b2. What is the firm’s terminal value? b3. What is the firm’s total value today? b4. What is an estimate of TTC's price per share?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section: Chapter Questions

Problem 21P

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