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if this years free cash flow is 500 million and the growth rate of the cash...

if this years free cash flow is 500 million and the growth rate of the cash flow is 5% with a required return of 10%, the value of operation is a little over 10 billion. T/F

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Answer #1

(Value of Operations = Free cash Flow *(1+Growth)/(Required Rate - Growth) = 500*(1+5%)/(10%-5%) = 10,500 or 10.5 billion

Hence False because value of operations is 10.5 and not 10 billion

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