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Roku just launched an initial public offering (IPO), and you want to value its equity....

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Finance

Roku just launched an initial public offering (IPO), and you want to value its equity. Assume that the discount rate for Roku's equity is 20%. Roku does not currently pay any dividends. You expect them to make their first dividend payment of $20 million in 5 years from today. In year 6, they will make a dividend payment of $40 million. After year 6, you expect Roku's dividends to grow at a stable 5% per year. What is the value in year 6 (i.e., P6) of all the cash flows after year 6?

Question 24 options:

1)

$280 million

2)

$216 million

3)

$303 million

4)

$270 million

5)

None of the above.

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