Question
Firm ABC is financed with both equity and debt. Analysts expect Free Cash Flow of $700 million at the end of the year (t=1), $750
Firm ABC is financed with both equity and debt. Analysts expect Free Cash Flow of $700 million at the end of the year (t=1), $750 million at the end of year 2 (t=2), and $900 million at the end of year 3 (t = 3). After that, FCF is expected to grow indefinitely at the rage of 2% per year. Given the WACC of 15%, which of the equations below is correct to calculate Enterprise Value of ABC?
a. | 700 /1.15 + 750/1.152 + 900/1.153 + 900*(1.02)/(0.15 0.02)/1.154 | |
b. | 700 /1.15 + 750/1.152 + 900/1.153 + 900/(0.15 0.02)/1.154 | |
c. | 700 /1.15 + 750/1.152 + 900/1.153 + 900/(0.15 0.02)/1.153 | |
d. | 700 /1.15 + 750/1.152 + 900/1.153 + 900*(1.02)/(0.15 0.02)/1.153 |
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