Question 2:

Using the following information for Company X, use the free cash flow model (1) to calculate the company's continuing value.

Enter your answer as number with no dollar sign, no comma and 2 decimal places of precision.

Year +3 5,264.2 (1,970.4) 350.0 (350.0) Year +4 5,942.4 (2,278.7) (350.0) 350.0 Year +5 6,428.0 (2,587.3) Company X Statement of Cash Flows (in millions) Year + 1 Year + 2 Net cash flow from operations 4,648.5 4,616.6 Net cash flow from investing activities (1,555.0) (1,662.5) Increase (Decrease) in short-term debt 400.0 (400.0) Increase (Decrease) in long-term debt 400.0 Net cash flows - preferred stock and noncontrolling interest Net Cash Flows from Financing Activities (2,841.7) (2,790.4) Net Change in Cash 251.8 163.7 Interest Expense After tax 52. 9 5 7.8 Year + 6 5,490.7 (688.6) 100.4 (3,078.2) 215.6 57.8 (3,428.2) 235.5 57.8 (3,583.6) 257.1 56.8 (4,722.5) 79.6 60.6 Projected FCF to Common Equity Shareholders (Model 1) Year + 6 Company X's rc Company X's WACC Growth rate (8) 7.15% 6.95% 2.0% Net cash flows from operations + Decrease(Increase) in cash required for operations = FCF from operations for CS Shareholders + Net cash flows for investing activities + Net cash flows from debt financing + Net cash flows for preferred stock and noncontrolling interest = FCF for common equity holders Year + 1 4,648.5 (251.8) 4,396.7 (1,555.0) 1,000.0 Projected Year + 2 Year + 3 4,616.6 5,264.2 (163.7) (215.6) 4,452. 9 5 ,048.6 (1,662.5) (1,970.4) - Year +4 5,942.4 (235.5) 5,706.9 (2,278.7) Year +5 6,428.0 (257.1) 6,170.9 (2,587.3) 3,841.7 2,790.4 3,078.2 3,428.2 3,583.6 Continuing Value =