Nova Electrics anticipates cash flow from operating activities of $13 million in 20X1. It

Nova Electrics anticipates cash flow from operating activities of $13 million in 20X1. It will need to spend $8.5 million on capital investments to remain competitive within the industry. Common stock dividends are projected at $1.1 million and preferred stock dividends at $1.3 million.

a. What is the firm's projected free cash flow for the year 20X1?

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Expert Solution

Just Paid dividend = D = 3

Growth by 20%

D1 = 3(1.2) = $3.60

Growth by 15%

D2= 3.6(1.15) = $4.14

Growth by 10%

D3 = 4.14(1.1) = $4.554

Constant growth = 5%

D4 = 4.554(1.05) = $4.7817

Required rate = 15%

Current price of stock "TL 40.70" is the current value of stock.

Nabeel answered 1 year ago

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