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McClelland Enterprises invests a lot of money in R&D, and as a result it retains...

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Finance

McClelland Enterprises invests a lot of money in R&D, and as a result it retains and reinvests all of its earnings instead of paying dividends. A pension fund manager is interested in purchasing McClellands stock and has estimated its free cash flows for the next 3 years as follows: $5 million, $10 million, and $17 million. After the 3rd year, FCF is projected to grow at a constant 10 percent. McClellands WACC is 13 percent, its debt and preferred stock total $150 million, and it has 4 million shares of common stock outstanding. What is the value of McClellands stock price?

a.$161.84

b.$76.51

c.$64.09

d.$114.01

e.$101.59

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