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## Finance

 Basic Finance Corporate Finance Financial Management Financial Econometrics Portfolio Management Risk Management Public Finance Business Law & Ethics

Barrett Industries invests a lot of money in R&D, and as a result it retains and reinvests all of its earnings. In other words, Barrett 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 Barrett's stock. The pension fund manager has estimated Barrett's free cash flows for the next 4 years as follows: \$3 million, \$7 million, \$9 million, and \$16 million. After the 4th year, free cash flow is projected to grow at a constant 4%. Barrett's WACC is 9%, its debt and preferred stock total to \$10 million, and it has 7 million shares of common stock outstanding.

a. What is the present value of the free cash flows projected during the next 4 years? Round your answer to two decimal places at the end of the calculations. Enter your answer in millions. For ex, an answer of \$25,120,000 should be entered as \$25.12.

b. What is the firm's terminal value? Round your answer to two decimal places at the end of the calculations. Enter your answer in millions. For ex, an answer of \$25,120,000 should be entered as \$25.12.

c. What is the firm's total value today? Round your answer to two decimal places at the end of the calculations. Enter your answer in millions. For ex, an answer of \$25,120,000 should be entered as \$25.12.

d. What is an estimate of Barrett's price per share? Round your answer to two decimal places at the end of the calculations.

Basic Finance, Finance

• Category:- Basic Finance
• Reference No.:- M943499

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