NONCONSTANT GROWTH AND CORPORATE VALUATION Rework Problem 9-18, Parts a, b, and c, using a spreadsheet model. For Part b, calculate the price, dividend yield, and capital gains yield as called for in the problem. After completing Parts a through c, answer the following additional question using the spreadsheet model.
d. TTC recently introduced a new line of products that has been wildly successful. On the basis of this success and anticipated future success, the following free cash flows were projected:
After the tenth year, TTC’s financial planners anticipate that its free cash flow will grow at a constant rate of 6%. Also, the firm concluded that the new product caused the WACC to fall to 9%. The market value of TTC’s debt is $1,200 million, it uses no preferred stock, and there are 20 million shares of common stock outstanding. Use the
corporate valuation model to value the stock.