Posted: September 21st, 2016

-You are an investment analyst for a brokerage firm and have been asked to develop a recommendation about Softek for the firm’s clients. You’ve studied the fundamentals of the industry and the firm, and are now ready to determine what the stock should sell for based on the present value of future cash flows.

-You are an investment analyst for a brokerage firm and have been asked to develop a recommendation about Softek for the firm’s clients. You’ve studied the fundamentals of the industry and the firm, and are now ready to determine what the stock should sell for based on the present value of future cash flows.
A) Calculate a value for Softek’s stock assuming product Alpha is successful but Beta isn’t. In other words, assume two years of growth at 25% followed by 6% growth lasting indefinitely.
B) Calculate a price assuming Beta is also successful and holds Softek’s growth rate at 25% for two additional years.