Question
VALUATION. For this and the next 2 questions: A company's FCFs are shown below. After Year 3, FCF is expected to grow at a constant
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VALUATION. For this and the next 2 questions: A company's FCFs are shown below. After Year 3, FCF is expected to grow at a constant rate of 5%. Cost of capital is 13%. Calculate the horizon value of the firm (i.e. HV3).
Year 1
Year 2
Year 3
FCF
-$20
$30
$40
$525 million
$500 million
$323.08 million
$397.37 million
None of the above
QUESTION 22
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Calculate the value of the firm today (i.e. the PV of both the FCFs and the horizon value).
$525 million
$500 million
$323.08 million
$397.37 million
None of the above
QUESTION 23
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Suppose the firm's market value of debt is $50 million. What is your estimate of the firm's value of equity?
$330.54 million
$347.37 million
$447.36 million
$397.37 million
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Finance Applications And Theory
Authors: Marcia Millon Cornett, John R. Nofsinger, Troy Adair
3rd International Edition
1259252221, 9781259252228
