Office Max is a fast growing supplier of office products. Analysts project the following cash flows (FCFs) during the next 5 years, after which FCF is expected to grow at a constant rate of 7 percent. Office Max’s cost of capital (WACC) is 11%

Time 1                2              3            4               5

Free cash flow ($ million) -$20           $30 $40         $45          $52

a. What is Office Max’s terminal value of cash flows at year 5 (i.e., V5)?

b. What is the current value of operations (total PV at time 0 or V0) for Office Max?

c. Suppose Office Max has $10 million in non-operating assets, $40 million in debt, $30 million in preferred stocks, and 10 million shares of stock. What is the current price per share of Office Max?

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