Brandtly Industries invests a large sum of money in R&D; asa result, it retains and reinvests all of its earnings. In otherwords, Brandtly does not pay any dividends, and it has no plans topay dividends in the near future. A major pension fund isinterested in purchasing Brandtly's stock. The pension fund managerhas estimated Brandtly's free cash flows for the next 4 years asfollows: $2 million, $6 million, $8 million, and $15 million. Afterthe fourth year, free cash flow is projected to grow at a constant7%. Brandtly's WACC is 9%, the market value of its debt andpreferred stock totals $54 million; and it has 12 million shares ofcommon stock outstanding.
Write out your answers completely. For example, 13 millionshould be entered as 13,000,000.
- What is the present value of the free cash flows projectedduring the next 4 years? Round your answer to the nearest cent. Donot round your intermediate calculations.
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- What is the firm's horizon, or continuing, value? Round youranswer to the nearest cent.
$
- What is the firm's total value today? Round your answer to thenearest cent. Do not round your intermediate calculations.
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- What is an estimate of Brandtly's price per share? Round youranswer to the nearest cent. Do not round your intermediatecalculations
