Aviato Inc. is social media aggregator. The company is currently re-investing all free cash flow...
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Aviato Inc. is social media aggregator. The company is currently re-investing all free cash flow into product development and so does not plan to make payouts for the next two years. Three years from now it plans to pay dividends with an aggregate value of $100M and to spend $200M buying back shares. It expects total payouts to grow at 10% for three years as product sales grow quickly. Starting six years from today, payout growth is expect to slow to a constant, perpetual level of 5%. The payouts are shown in the table, below. Today is time '0'. Aviato investors require a return of 9% and there are currently 200M shares outstanding. What are Aviato's shares worth today?
Year Payout Payout Growth
0 0 0
1 0 0
2 0 0
3 $300 0
4 $330 10%
5 $363 10%
6 $399.3 10%
7 $419.27 5%
Question 10 options:
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| $42.21 |
|
| $35.95 |
|
| $22.79 |
|
| $63.85 |
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