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# Current Value and Horizon Value

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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

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