Reference no: EM132847432

Common stock valueThe market value of? Lawrence's shares is ?$___________?(Round to the nearest? cent.)

-Variable growth   Lawrence? Industries' most recent annual dividend was ?$2.15 per share ?(D0=$2.15?), and the? firm's required return is 11?%. Find the market value of? Lawrence's shares when dividends are expected to grow at 8?% annually for 3? years, followed by a 5?% constant annual growth rate in years 4 to infinity.

Free cash flow valuation  You are evaluating the potential purchase of a small business with no debt or preferred stock that is currently generating ?$41,700 of free cash flow ?(FCF0?= ?$41,700?). On the basis of a review of? similar-risk investment? opportunities, you must earn?a(n) 19?% rate of return on the proposed purchase. Because you are relatively uncertain about future cash? flows, you decide to estimate the? firm's value using several possible assumptions about the growth rate of cash flows.

a. What is the? firm's value if cash flows are expected to grow at an annual rate of? 0% from now to? infinity? (Round to the nearest? cent.)

b. What is the? firm's value if cash flows are expected to grow at a constant annual rate of 6?% from now to? infinity? (Round to the nearest? cent.)

c. What is the? firm's value if cash flows are expected to grow at an annual rate of 12?% for the first 2? years, followed by a constant annual rate of 6?% from year 3 to? infinity? (Round to the nearest? cent.)