6. You are evaluating a prospective LBO investment and determine that the Year 5 free cash flow (FCF) estimate is $850 million. Additionally, based on related work you estimate that the appropriate discount rate is 8.5% and the long term growth rate is 3.5%. Based on the perpetuity growth method, the Terminal Value of the company is .

a. $17.6 bn, year 5

b. $17.0 bn, year 6

c. $10.0 bn, year 5

d. $17.6 bn, year 6

7. On the previous question, the present value of the Terminal Value is:

a. $17.6 bn

b. $14.8 bn

c. $11.7 bn

d. $6.7 bn