# Current Value and Horizon Value

Suppose a company's most recent free cash flow (i.e., yesterday's free cash flow) was $100 million and is expected to grow at a constant rate of 5 percent. If the company's weighted average cost of capital is 15 percent, what is the current value of operations?

a. $ 913 million

b. $1,000 million

c. $1,050 million

d. $1,500 million

e. $2,000 million

14. A company forecasts free cash flow of $50 million in five years. It expects the free cash flow to grow at a constant rate of 6 percent thereafter. If the weighted average cost of capital is 12 percent, what is the horizon value, to the nearest million?

a. $53 million

b. $501 million

c. $600 million

d. $833 million

e. $883 million

https://brainmass.com/business/accounting/current-value-and-horizon-value-42438

#### Solution Preview

1. The value today is found by the following formula

Cash Flow * (1+growth Rate)/ (Discount ...

#### Solution Summary

The solution explains how to calculate the current value of operations and the horizon value given the free cash flows