Cash flows are expected to grow at rate

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Chipotle expects to earn a free cash flow of $500 in one year; further, these cash flows are expected to grow at a rate of 3% forever. The firm’s unlevered cost of capital is 15%. Chipotle also has debt outstanding with a face value of $1000 and a maturity of 1 year, with an annual interest rate of 10%. The discount rate for its debt (i.e. yield-to-maturity) is also 10%. After the debt matures in 1 year, Chipotle will not issue more debt. What is the value of Chipotle if its tax rate is 40%?

?A. 4166.67

B. 4201.45

C. 4202.01

D. 4203.03

Reference no: EM131541127

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