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How to get the answer D? For the figures below, assume that there is zero inflation forecasted and that Blueberry expects real growth in sales
How to get the answer D?
For the figures below, assume that there is zero inflation forecasted and that Blueberry expects real growth in sales to be 1%. The WACC of the company equals 7%. The company is financed 30% with debt (investment grade bonds) and for the remainder with equity. Which of the amounts below is closest in magnitude to the terminal value of Blueberry cash flows as of t=5, using the free cash flow method for valuation purposes?
($MM) Year Year 2 Year 3 Year 4 Year 5 1 4078 4650 4338 4860 5230 1000 1424 1000 1626 500 1554 500 1740 500 1874 EBIT Interest payments Taxes Depreciation and amortization Capital expenditures 2598 2826 2940 3054 3168 3508 6864 -2360 5440 4266 Selected Answer: [None Given] Answers: a. 32580 b. 2280 c. 2258 d. 38000 e. OStep by Step Solution
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