Question
You have just learned that B&M has undertaken a major expansion that will change its expected free cash flows to -$10 million in 1 year,
You have just learned that B&M has undertaken a major expansion that will change its expected free cash flows to -$10 million in 1 year, $20 million in 2 years, and $35 million in 3 years. After 3 years, free cash flow will grow at a rate of 5%. No new debt or preferred stock was added; the investment was financed by equity from the owners. Assume the WACC is unchanged at 11% and that there are still 10 million shares of stock outstanding. g) If B&M undertake the expansion, what percent of B&Ms value of operations at Year 0 is due from Cash flows from year 4 and beyond?
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