Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Question 3. Interest Rate 5% 7% Required Rate of Return for Risk Associated With Projected Future Three Year's Free Cash Flows. FCF - Years 2022
| Question 3. | Interest Rate | 5% | 7% | Required Rate of Return for Risk Associated With Projected Future Three Year's Free Cash Flows. | ||||||||||
| FCF - Years | 2022 | 2023 | 2024 | 2022 | 2023 | 2024 | Your selected company is projecting that free cash flows for the next three (3) years will increase by 3% annually. Using the free cash flows from Question 1 above, increase each of the future free cash flows by 3% and enter these numbers in the yellow highlighted areas. As there is a chance that these increases may not occur as projected, a buyer who may be willing to purchase the company before the increases occur, will account for this risk by using a required rate of return of 7%. What price would the potential buyer be willing to pay based upon the known free cash flows and the future projected free cash flows? | |||||||
| FCF in dollars* | $ 21,764.93 | $ 22,417.88 | $ 23,090.41 | $ 13,198.00 | $ 1,655.00 | $ 21,131.00 | ||||||||
| Pv* | $ (20,728.50) | $ (20,333.68) | $ (19,946.37) | $ (12,334.58) | $ (1,445.54) | $ (17,249.19) | ||||||||
| *In millions | ||||||||||||||
| Total Pv* | $ (92,037.86) | |||||||||||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started