Question
A company forecasts the free cash flows (in millions) shown below. The weighted average cost of capital is 13%, and the FCFs are expected to
A company forecasts the free cash flows (in millions) shown below. The weighted average cost of capital is 13%, and the FCFs are expected to continue growing at a 6% rate after Year 3. Assuming that the return on capital is expected to remain constant in Year 3 and beyond, what is the Year 0 value of operations, in millions?
| Year: | 1 | 2 | 3 |
| Free cash flow: | -$15 | $10 | $40 |
| 1. | $386 | |
| 2. | $442.06 | |
| 3. | $331 | |
| 4. | $315 | |
| 5. | $348
|
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The Handbook For Investment Committee Members
Authors: Russell L. Olson
1st Edition
0471719781, 978-0471719786
