3. Tortured Poet Industries invests a large sum of money in R&D as a result,...
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Tortured Poet Industries invests a large sum of money in R&D as a result, it retains and reinvests all of its earnings. In other words, Tortured Poet 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 Tortured Poets stock. The pension fund manager has estimated Tortured Poets free cash flows for the next years as follows: $ million, $ million, $ million, and $ million. After the fourth year, free cash flow is projected to grow at a constant Tortured Poets WACC is the market value of its debt and preferred stock totals $ million, the firm has $ million in nonoperating assets, and it has million shares of common stock outstanding. a What is Tortured Poet's horizon value? b What is the pension fund's estimated price per share?
Tortured Poet Industries invests a large sum of money in R&D as a result, it retains and reinvests all of its earnings. In other words, Tortured Poet 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 Tortured Poets stock. The pension fund manager has estimated Tortured Poets free cash flows for the next years as follows: $ million, $ million, $ million, and $ million. After the fourth year, free cash flow is projected to grow at a constant Tortured Poets WACC is the market value of its debt and preferred stock totals $ million, the firm has $ million in nonoperating assets, and it has million shares of common stock outstanding.
a What is Tortured Poet's horizon value?
b What is the pension fund's estimated price per share?
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