Roku just launched an initial public offering (IPO), and you want to value its equity....
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Roku just launched an initial public offering (IPO), and you want to value its equity. Assume that the discount rate for Roku's equity is 20%. Roku does not currently pay any dividends. You expect them to make their first dividend payment of $20 million in 5 years from today. In year 6, they will make a dividend payment of $40 million. After year 6, you expect Roku's dividends to grow at a stable 5% per year. What is the value in year 6 (i.e., P6) of all the cash flows after year 6?
Question 24 options:
1)
$280 million
2)
$216 million
3)
$303 million
4)
$270 million
5)
None of the above.
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