Question 18 4 pts The free cash flows (in millions) shown below are forecast by Simmons Inc. If the weighted average cost of capital is 13% and the free cash flows are expected to continue growing at the same rate after Year 3 as from Year 2 to Year 3, what is the Year O value of operations, in millions? Year: 1 2 3 Free cash flow: -$20 $42 $45 O $714 O $617 O $648 O $586 O $680 5 pts D Question 19 FIN Corp. has determined that its before-tax cost of debt is 9.0%. Its cost of preferred stock is 12.0%. Its cost of internal equity is 15.0%, and its cost of external equity is 19.0%. Currently, the firm's capital structure has $400 million of debt, $100 million of preferred stock, and $500 million of common equity. The firm's marginal tax rate is 40%. The managers have determined that the firm should have $80 million available from retained earnings for investment purposes next period. What is the firm's marginal cost of capital (WACC) at a total investment level of $200 million? (Break Even = retained earnings / % of equity) O 11.29% O 14.20% O 10.64% O 12.86% O 13.58% Question 20 5 pts You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck. The company already spent $15,000 (i.e., sunk cost) in last year to improve the production line site. The truck's basic price is $90,000, and it will cost another $10,000 to modify it for special use by your firm. Use of the truck will require an increase in net operating working capital (spare parts of inventory) of $25,000. The truck falls into the MACRS 3 year class, and it will be sold after three years for $20,000 (salvage value). The truck will increase the sale by $200,000, and the cost of all expenses will be 40% of sales. The firm's marginal tax rate is 40 percent. What is the operating cash flow in Year 1? O $85,200 O $52,200 O $98,000 O $120,800 O $45,000