# Entire Value of Company Vc, Complete two classmate responses for financial course

CLASSMATE POST 1:

 Year (t) FCF(t) (1) (1 + ra)^t (2) Present Value of FCF(t) [(1) /(2)] (3) 2013 \$700,000 1.080 \$648,148 2014 \$800,000 1.166 \$686,106 2015 \$950,000 1.259 \$754,567 2016 1,100,000 1.360 \$808,823 2017 19,800,00 1.469 \$13,478,556 Entire Value of Company Vc \$16,376,200
1. Use the free cash flow valuation model to estimate CoolTech’s Common  Stock Value per share

Vs = \$16,376,200 – \$2,700,000 – \$1,000,000 = \$12,676,200

Vs = \$12,676,200

The value of CoolTech’s Common stock is estimated as \$12,676,200

Dividing the estimated value by the total amount of shares =

\$12,676,200/ 1,100,000

= \$11.52 per share

1. Judging on the basis of my findings of the estimated value of the share being \$11.52 per share, I will NOT  buy the stock. Considering the fact that I was offered \$12.50 per share in the IPO.
CLASSMATE POST 2:

Lawrence Industries’ most recent annual dividend was \$1.80 per share (D0 = \$1.80), and the firm’s required return is 11% Find the market value of Lawrence’s shares when:

a.) Dividends are expected to grow at 8% annually for 3 years, followed by a 5% constant annual growth rate in years 4 to infinity.

D4 = D3 X (1 + .05)

= \$2.27 X (1.05)

= \$2.38

P3 = D4 / rs-g2

= 2.38 / (.11 – .05)

= 2.38 / .06

= \$39.67

b.) Dividends are expected to grow at 8% annually for 3 years, followed by a 0% constant annual growth rate in years 4 to infinity.

D4 = D3 X (1 + 0)

= \$2.27 X (1)

= \$2.27

P3 = D4 / rs – g2

= 2.27 / (.11 – 0)

= 2.27 / .11

= \$20.64

c.) Dividends are expected to grow at 8% annually for 3 years, followed by a 10% constant annual growth rate in years 4 to infinity.

D4 = D3 X (1 + .10)

= 2.27 X 1.10

= \$2.50

P3 = D4 / rs – g2

= 2.50 / (.11-.10)

= 2.50 / .01

=\$250