Consider a company that is financing an expansion, with theexpansion financed by
the owners. Projected free cash flows are -$25 million in year 1,+$10 million in year 2, +30 million
in year 3, and +$50 million in year 4. After year 4, the cash flowsare expected to grow at a constant
rate of 6%. For the company, the weighted average cost of capitalis 14%, short-term investments
for the company are $80 million, company debt is at $150 million,the amount of preferred stock
is at $30 million, and there are 5 million shares outstanding. A.)Using a free cash flow valuation
approach, what is the value from operations for the company? B.)What is the total intrinsic value
of the company? C.) What is the estimated intrinsic value of theequity? D.) What is the estimated
intrinsic stock price per share?
