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Part $1$

Covan$,$ Inc. is expected to have the following free cash$$ flow: LOADING....

a$.$ Covan has $8$ million shares$$ outstanding, $$$$2$ million in excess$$ cash, and it has no debt. If its cost of capital is $11\%,$ what should be its stock$$ price?

Covan reinvests all its FCF and has no plans to add debt or change its cash holdings. If you plan to sell Covan at the beginning of year$2,$ what is its expected$$ price?

c$.$ Assume you bought Covan stock at the beginning of year $1.$ What is your expected return from holding Covan stock until year$2?$