Question
ABC Company expects its free cash flows to vary considerably during the next few years. However, its FCF is expected to be $39 million in
ABC Company expects its free cash flows to vary considerably during the next few years. However, its FCF is expected to be $39 million in Year 5 (i.e., FCF at t=5), and the FCF growth rate is expected to be a constant 6.6% beyond that point. The company's WACC is 12.5%. What is the horizon value (in millions) in year 5 (i.e., t=5)? Do not discount the horizon value to Year 0. Round your answer to the nearest dollar. (Hint: Use the horizon value (HV) formula with a constant growth.)
a. $711 million
b. $715 million
c. 708 million
d. 701 million
e. 705 million
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