White Sands Telematics, Inc. embarked on an aggressive expansion that requires additional capital. Management decided to...
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White Sands Telematics, Inc. embarked on an aggressive expansion that requires additional capital. Management decided to finance the expansion by borrowing $15 million and halting dividend payments to increase retained earnings. Its WACC is now 9%, and the projected free cash flows for the next 3 years are -$6 million, $10 million, and $20 million. After Year 3, free cash flow is projected to grow at a constant 5%. If it has 10 million shares of stock, $30 million of debt and preferred stock combined, and $6 million of non-operating assets. a. What is White Sands Telematics Inc.'s market value of operations? (10 pts) b. What is the Value of the Firm? (5 pts) c. What is the Value of Equity? (5 pts) d. What is the Value of Stock? (10 pts) White Sands Telematics, Inc. embarked on an aggressive expansion that requires additional capital. Management decided to finance the expansion by borrowing $15 million and halting dividend payments to increase retained earnings. Its WACC is now 9%, and the projected free cash flows for the next 3 years are -$6 million, $10 million, and $20 million. After Year 3, free cash flow is projected to grow at a constant 5%. If it has 10 million shares of stock, $30 million of debt and preferred stock combined, and $6 million of non-operating assets. a. What is White Sands Telematics Inc.'s market value of operations? (10 pts) b. What is the Value of the Firm? (5 pts) c. What is the Value of Equity? (5 pts) d. What is the Value of Stock? (10 pts)
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