cks and Their Valuation Click here to read the eBook: Enterprise-Based Approach

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cks and Their Valuation Click here to read the eBook: Enterprise-Based Approach to Valuation Problem Walk-Threugh CORPORATE VALUATION Brandtly Industries invests a large sum of money in RAD; as a resuit, retains and reinvests all of its earnings In other words, Brandtly does not pay any dividends, and a has no plans to pay dividends in the near future. A major pensin fund is interested in purchasing Brandtly's stock The pension fund manager has estimated Brandbys wwerns wacc slon,th. mar vaue of its det and preferred stock totals 101 nsien .nd it has 17" shares of common stock c tutardig. Write out your answers completely For esamole, 13 million should be entered as 13,000,000 the earest cent not round your intermediae your intemediate A S D FGHJ K opion command command option

Explanation / Answer

Ans a) $28,533,000

Ans b) Terminal value = $15 * 1.06/(.16 - .06) = $159,000,000

Ans c) Firms Current value = $28533000 + $159,000,000/(1.16)^4 = $116,347,284.56

Ans d) Price per share = (116347284.56 - 64000000)/17000000 = $3.08

0 1 2 3 4 Cashflow $                     -   $              3.00 $              5.00 $                8.00 $              15.00 Present Value $                     -   $              2.59 $              3.72 $                5.13 $                8.28 Net Present Value $              28.53

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