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1.  Suppose that a company has a Free Cash Flow of $150,000 in one year, $200,000 in 2 ...

1.  Suppose that a company has a Free Cash Flow of $150,000 in one year, $200,000 in 2 years and then FCFs start growing at a constant rate of 5%. The WACC used as a discount rate for FCFs is 8%. The company has $ 18,000 in long-term debt and it has 40,000 shares outstanding. Find current stock price using FCF model.

2. Let's take a look at a different company. Free cash flows are usually volatile when a company is growing. Suppose that after 5 years of uneven growth FCF stabilizes and it is expected to be $50 million in Year 5. Its growth rate is expected to be constant at 6% beyond that point. If the weighted average cost of capital is 12%, what is the horizon value (in millions) at t = 5?

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Answer #1

Soktion 0 GNen ng -Ty 18,00do 200000 X 105 _sooo (y.cz?. (N.-5A) 1.08 B8888:9-土600137174 -W20 40000 153.0565 Hosi2ontal volv

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