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Free Cash Flow and WACC

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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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 ...

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You will find the answers to these puzzling questions inside...

$2.19