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VALUATION. For this and the next 2 questions: A company's FCFs are shown below. After Year...

  1. 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

  1. 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

  1. 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

Solutions

Expert Solution

jeff jeffy answered 1 year ago
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