Office Max is a fast growing supplier of office products. Analysts project the following cash flows (FCFs) during the next 5 years, after which FCF is expected to grow at a constant rate of 7 percent. Office Max’s cost of capital (WACC) is 11%
Time 1 2 3 4 5
Free cash flow ($ million) -$20 $30 $40 $45 $52
a. What is Office Max’s terminal value of cash flows at year 5 (i.e., V5)?
b. What is the current value of operations (total PV at time 0 or V0) for Office Max?
c. Suppose Office Max has $10 million in non-operating assets, $40 million in debt, $30 million in preferred stocks, and 10 million shares of stock. What is the current price per share of Office Max?
Please explain step by step.