Please show all work/formulas. Thank you.

1. Gere Furniture forecasts a free cash flow of $40 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5% thereafter. If the weighted average cost of capital is 10%, what is the horizon value, in millions at t = 3?

a. $840

b. $882

c. $926

d. $972

e. $1,021

2. Young & Liu Inc.s free cash flow during the just-ended year (t = 0) was $100 million, and FCF is expected to grow at a constant rate of 5% in the future. If the weighted average cost of capital is 15%, what is the firms value of operations, in millions?

a. $948

b. $998

c. $1,050

d. $1,103

e. $1,158

3. Heath and Logan Inc. 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 5% rate after Year 3. Assuming that the ROIC 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

a. $315.41

b. $331.20

c. $348.99

d. $367.86

e. $386.13

4. Reynolds Constructions value of operations is $750 million based on the corporate valuation model. Its balance sheet shows $50 million of short-term investments that are unrelated to operations, $100 million of accounts payable, $100 million of notes payable, $200 million of long-term debt, $40 million of preferred stock, and $160 million of retained earnings. What is the best estimate for the firms value of equity, in millions?

a. $429

b. $451

c. $475

d. $560

e. $525

5. Based on the corporate valuation model, the value of Weidner Co.s operations is $1,200 million. The companys balance sheet shows $80 million in accounts receivable, $60 million in inventory, and $100 million in short-term investments that are unrelated to operations. The balance sheet also shows $90 million in accounts payable, $120 million in notes payable, $420 million in long-term debt, $50 million in preferred stock, $180 million in retained earnings, and $800 million in total common equity. If Weidner has 30 million shares of stock outstanding, what is the best estimate of the stocks price per share?

a. $24.90

b. $27.67

c. $30.43

d. $33.48

e. $36.82

6. A company has capital of $400 million. It has an EROIC of 12%, forecasted constant growth of 6%, and a WACC of 13%. What is its value of operation? What is its intrinsic MVA?

a. VOP = $342.857, MVA = -$57.143

b. VOP = $457.142, MVA = $57.143

c. VOP = $326.857, MVA = $26.567

d. VOP = $400.00, MVA = $0

e. VOP = $563.871, MVA = $42.867

7. You are given the following forecasted information for year 2014: sales = $550,000,000, operating profit (OP) = 7.7%, capital requirements (CR) = 35%, growth (g) = 4%, and the weighted average cost of capital (WACC) = 10.8%. If these values remain constant, what is the horizon value (i.e., the 2014 value of operations)?

a. Vop = $192,500,000

b. Vop = $550,000,000

c. Vop = $534,471,882.40

d. Vop = $228,931.400.65

e. VOP = $534,470,588.20

8. Using the information from Problem 7, what is the MVA?

a. MVA = $341,970,588.20

b. MVA = $192,500,000.00

c. MVA = $321,495,881.45

d. MVA = $487,330,291.41

e. MVA = $447,321,435.28

9. Which of the following does NOT always increase a companys market value?

a. Increasing the expected operating profitability (NOPAT/Sales).

b. Decreasing the capital requirements (Capital/Sales).

c. Decreasing the weighted average cost of capital.

d. Increasing the expected rate of return on invested capital.

e. Increasing the expected growth rate of sales.

[1]0. Which of the following statement is correct?

a. The corporate valuation model cannot be used unless a company doesnt pay dividends.

b. Free cash flows should be discounted at the firms weighted average cost of capital to find the value of its operations.

c. Value-based management focuses on sales growth, profitability, capital requirements, the weighted average cost of capital, and the dividend growth rate.

d. Two important issues in corporate governance are (1) the rules that cover the boards ability to fire the CEO and (2)the rules that cover the CEOs ability to remove members of the board.

e. If a companys expected return on invested capital is less than its cost of equity, then the company must also have a negative market value added (MVA)