Look again at Table 4.7.

a. How do free cash flow and present value change if asset growth rate is only 15 percent in years 1 to 5? If value declines, explain why.

b. Suppose the business is a publicly traded company with one million shares outstanding. Then the company issues new stock to cover the present value of negative free cash flow for years 1 to 6. How many shares will be issued and at what price?

c. Value the company's one million existing shares by the two methods described in Section4.5.

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Year 10 3. Asset value Earnings 26.47 3.18 29.73 3.57 1.78 1.79 10.00 1.20 2.00 -.80 12.00 1.44 2.40 20.74 17.28 2.07 23.43 2.81 28.05 3.36 1.68 1.68 31.51 3.78 1.89 1.89 14.40 1.73 3.46 2.69 1.59 1.59 3.04 Investment 2.88 -1.15 Free cash flow Earnings growth from previous period (%) -20 -.96 -1.39 - 23 20 20 20 20 20 13 13