The firm forecasts a free cash flow of ₱ 41 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5% thereafter. If the weighted average cost of capital is 11% and the cost of equity is 15%, what is the horizon value, in millions at t = 3? a. ₱ 840 b. ₱ 717 c. ₱ 883 d. ₱ 834

The firm forecasts a free cash flow of ₱ 41 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5% thereafter. If the weighted average cost of capital is 11% and the cost of equity is 15%, what is the horizon value, in millions at t = 3? a. ₱ 840 b. ₱ 717 c. ₱ 883 d. ₱ 834

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 23E: Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The...

See similar textbooks

Similar questions

Misra Inc. forecasts a free cash flow of $55 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5.5% thereafter. If the weighted average cost of capital (WACC) is 10.0% and the cost of equity is 15.0%, then what is the horizon, or continuing, value in millions att = 3? a. $1,212 b. $1,083 O c. $1,186 O d. $1,148 O e. $1,289
15. The firm forecasts that its free cash flow in the coming year, i.e., at t= 1, will be P 10 million, but its FCF at t= 2 will be P 20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions? с. 173 f. 204 а. 124 b. 167 d. 184 е. 138
A company forecasts a free cash flow of $55 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5.5% thereafter. If the weighted average cost of capital (WACC) is 10.0% and the cost of equity is 15.0%, then what is the horizon, or continuing, value in millions at t = 3? Group of answer choices $1,083 $1,148 $1,289 $1,186 $1,212
Kollo Enterprises has a beta of 0.80, the real risk-free rate is 2.20%, investors expect a 3.00% future inflation rate, and the market risk premium is 4.70%. What is Kollo's required rate of return? Do not round your intermediate calculations. a. 8.86% O b. 8.96% O c. 7.92% d. 8.36% O e. 6.76%
4. Your firm is evaluating a project that should generate revenue of P4,600 in year 1, P5,200 in year two, P5,900 in year three, and P5,700 in year four. The firm receives each cash flow at the end of each year. If your firm's required return is 12%, what is the future value of these cash flows at the end of year four? a.P16,074.51b.P22,583.53c.P25,293.55d.P28,328.77
For the given cash flows, suppose the firm uses the NPV decision rule. Year Cash Flow 0 –$ 162,000 1 54,000 2 85,000 3 69,000 a. At a required return of 8 percent, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. At a required return of 20 percent, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
A company is considering an investment with the following expected cash flows, in constant dollars. The general inflation rate (7) during this project period is expected to be 5%. The company's market interest rate is 15%. What is the equivalent present worth of these cash flows at period 07 O $ 3,567 O $7,618 $ 4,248 O $6,927 $ 8,317 Year 0 1 2 3 Cash flow ($) -30,000 15,000 15,000 15,000
A firm will give a one-time cash flow of $21000 after one year. If the project risk requires a return of 8%, what is the levered value of the firm with perfect capital markets? OA. $19,444 OB. $23,333 OC. $15,556 D. more information needed
The table below gives the expected cash inflows of a firm for a period of 9 years. Time 3 6 9 Cash inflow (£) 45000 90000 120000 Assume the present value of the cash outflows is £87000, and the applicable cost of capital is 13%. Calculate the (a) Future value of the cash inflows (b) Modified internal rate of return (MIRR)
You are evaluating Adidas and expect it to generate the following free cash flows over your forecast horizon: Year 1 2 3 4 5 FCF ($ millions) 53.1 66.9 77.8 75.5 82.1 After your forecast horizon, you expect FCF to grow at 4.3% per year forever. If the weighted average cost of capital (dsicount rate) is 13.8%, what is: a. The enterprise value of Adidas. b. Assume Adidas has no excess cash, debt of $318 million, and 39 million shares outstanding, what is its stock price? Question content area bottom Part 1 a. The enterprise value will be $enter your response here million. (Round to two decimal places.) b. The stock price will be $enter your response here. (Round to two decimal places.)
For the given cash flows, suppose the firm uses the NPV decision rule. Year 0 1 Cash Flow -$ 41,000 20,000 2 3 23,000 14,000 a. At a required return of 11 percent, what is the NPV of the project? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. At a required return of 24 percent, what is the NPV of the project? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. a. NPV b. NPV
ABC Co. forecasts the following free cash flows to the firm (FCFF) in the coming years: Year 1: (₱10 million) Year 2: ₱20 million. After Year 2, the FCFF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%, the firm’s value is nearest to ₱158,000,000 ₱167,000,000 ₱175,000,000 ₱184,000,000 ₱193,000,000