1. If the firm is three years away from achieving its continuing value, its free cash...
1. If the firm is three years away from achieving its continuing value, its free cash flows are expected to grow 4.0% per year, and investors will demand a 24.0% rate of return when the firm reaches its continuing value. Its present value of the continuing value will be what multiple of its free cash flows?
A. around 2.7
B. around 3.25
C. 16
Homework Answers
Value of Firm = FCFF(1.04)/(0.24 - 0.04)(1.24)3
Value of Firm/FCFF = 2.7
So,
Value of Firm/FCFF = 2.7
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