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?
Chapter7: Valuation Of Stocks And Corporations
Section: Chapter Questions
Problem 21P
Related questions
Question
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?
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