3(2). 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?

3(3). Suppose a company's projected free cash flow for next year is $500 million and it is expected to grow at a constant rate of 6 percent. If the company's weighted average cost of capital is 11 percent, what is the current value of operations, to the nearest million?

3(5). A company forecasts the following free cash flows (shown in millions of dollars). If the weighted average cost of capital is 13 percent and the free cash flows are expected to continue growing at the same rate after Year 3, what is the Year 0 value of operations, to the nearest million?

Year: 1 2 3
Free cash flow: -$20 $40 $42

a. $382 million
b. $425 million
c. $460 million
d. $475 million
e. $488 million

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