Questions

Problem $9\mathrm{.}19($Corporate Valuation$)$

Question $19$ of $24*$

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Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Brandtly does not pay any dividends, and it has no plans to pay dividends in the near future. A major pension fund is interested in purchasing Brandtly's stock. The pension fund manager has estimated Brandtly's free cash flows for the next $4$ years as follows: $$4$ million, $$6$ million, $$11$ million, and $$16$ million. After the fourth year, free cash flow is projected to grow at a constant $7\%.$ Brandtly's WACC is $9\%,$ the market value of its debt and preferred stock totals $$74$ million, the firm has $$14$ million in nonoperating assets, and it has $16$ million shares of cormmon stock outstanding.

a$.$ What is the present value of the free cash flows projected during the next $4$ years? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, $13$ million should be entered as $13,000,000.$ $

b$.$ What is the firm's horizon, or continuing, value? Round your answer to the nearest dollar. Write out your answers completely. For example, $13$ million should be entered as $13,000,000.$

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c$.$ What is the market value of the company's operations? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, $13$ million should be entered as $13,000,000.$ $M