Posted: July 20th, 2021

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

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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$648,1482014$800,000 1.166$686,1062015$950,000 1.259$754,56720161,100,0001.360$808,823201719,800,001.469$13,478,556Entire Value of Company Vc$16,376,200Use 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 = $12,676,200Vs = $12,676,200The value of CoolTech’s Common stock is estimated as $12,676,200Dividing the estimated value by the total amount of shares =$12,676,200/ 1,100,000= $11.52 per shareJudging 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)      = $2.38P3 = D4 / rs-g2     = 2.38 / (.11 - .05)    = 2.38 / .06    = $39.67b.) 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    = $20.64c.) 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    = $2.50P3 = D4 / rs - g2    = 2.50 / (.11-.10)    = 2.50 / .01    =$250

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