Question
Gonzales Corporation generated free cash flow of $87 million this year. For the next two years, the company's free cash flow is expected to grow
Gonzales Corporation generated free cash flow of $87 million this year. For the next two years, the company's free cash flow is expected to grow at a rate of 10%. After that time, the company's free cash flow is expected to level off to the industry long-term growth rate of 4% per year. If the weighted average cost of capital is 12% and Gonzales Corporation has cash of $100 million, debt of $300 million, and 100 million shares outstanding, what is Gonzales Corporation's expected terminal enterprise value in year 2?
The answer to this question is $1368.51. I've done the calculations several times and have yet to come up with this value.
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