IDX Technologies is a privately-held developer of advanced security systems based in Chicago. As part of your business development strategy, in late 2008 you initiate discussions with IDX's founder about the possibility of acquiring the business at the end of 2008.

Part A) (9 points) Estimate the value of IDX per share at the end of 2008 using the following data:

Shares outstanding: 50 million

Expected free cash flow (FF) in 2009: $45 million

Expected free cash flow (FF) in 2010: $50 million

Free cash flow grows 15% in 2011

Free cash flow grows 8% in 2012

Free cash flow grows 5% per year for all subsequent years (e.g., future free cash flow (FCF)

growth rate beyond 2012: 5%)

Rate of return: 9.4%

Part B) (6 points) What is the company price to earnings (P/E) ratio based on 2011 earnings? How much are the dividends for 2012 year? Use the following information:

Assume earnings grow at 8% in each of the years 2011 and 2012.

Sales in 2010: $650 million

Profit margin: 12%

Shares outstanding: 50 million

Use the value of the share (e.g., its price) as computed in part a)

In 2010 IDX Technologies Company will pay out $0.35 of 2010 year earnings per share to

shareholders in the form of a dividend. Payout ratio stays the same over time.

Use and present answer with 4 decimals.