Reizenstein Technologies (RT) has just developed a solar panel capable of genera
ID: 2771672 • Letter: R
Question
Reizenstein Technologies (RT) has just developed a solar panel capable of generating 200% more electricity than any solar panel currently on the market. As a result, RT is expected to experience a 18% annual growth rate for the next 5 years. By the end of 5 years, other firms will have developed comparable technology, and RT’s growth rate will slow to 7% per year indefinitely. Stockholders require a return of 18% on RT’s stock. The most recent annual dividend (D0), which was paid yesterday, was $1.50 per share.
Calculate the estimated intrinsic value of the stock today, P0.
Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 5% rate. Dozier’s weighted average cost of capital is WACC = 12%. What is Dozier’s terminal, or horizon, value?
$39.44
Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 5% rate. Dozier’s weighted average cost of capital is WACC = 12%. Suppose Dozier has $20 million in marketable securities, $250 million in debt, and 10 million shares of stock. What is the intrinsic price per share?
$31.96 $36.81 $12.66 $22.09Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 5% rate. Dozier’s weighted average cost of capital is WACC = 12%. What is Dozier’s terminal, or horizon, value?
Year 1 2 3 Free cash flow ($ millions) ($10) $25 $50 $541.67 $713.33 $750.00 $571.43 $1,000.00$39.44
Explanation / Answer
1)correct option is "C" - 12.66 per share.
Reason:
Dividend at the end of 5 year = [1.50(1+.18)^5]
= [1.50 (1.18)^5]
= [1.50 * 2.28776] = $ 3.43164
Terminal value at the end of 5 year = [3.43164(1+.07) /(.18-.07)
=[3.43164*1.07 ] /.11
= 3.67185 /.11
= 33.38
so present value of terminal value = terminal value *PVF@ 18%,5year
= 33.38 * .37043
= $ 12.36 (approx 12.66)
2)correct option is "C" -$750
Reason:
Terminal value = year 3cash flow (1+ g) /(cost of equity -g)
= 50 (1+.05) /(.12 -.05)
= 50 *1.05 / .07
= 52.50 /.07
= $ 750
3) present value of cash flow = (cash flow of each year * PVF@12%,n year)
=(-10 * .89286) +(25 *.79719) +([50+750 for terminal value calculated in part2 ]*.71178)
= - 8.93 + 19.93 + 569.42
= 580.42
Intrinsic value per share= 580 .42 / 10
= $ 58 .04per share