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33. Stalcup Enterprises forecasts the free cash flows (in millions) shown below. The weighted average cost of capital is 13.0

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Answer #1

The firm's total corporate value is computed as shown below:

= FCF in year 1 / (1 + WACC)1 + FCF in year 2 / (1 + WACC)2 + FCF in year 3 / (1 + WACC)3 + 1 / (1 + WACC)3 x [ ( FCF in year 3 (1 + growth rate) / ( WACC- growth rate) ]

= - $ 15 / 1.13 + $ 10 / 1.132 + $ 25 / 1.133 + 1 / 1.133 [ ( $ 25 x 1.05 ) / ( 0.13 - 0.05 ) ]

= $ 239.29 Approximately

So, the correct answer is option e i.e. $ 239.29.

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