Determine what is the value of the firm

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Reference no: EM132740743

Suppose you have estimated the free cash flows to the firm over the next 5 years in the following way:

Year FCFF

1 $108 Million
2 $114 Million
3 $119 Million
4 $124 Million
5 $128 Million

Problem 1: You expect FCFF continue to grow at a constant rate of 5% per year, indefinitely, after year 5. If the company's weighted average cost of capital is 10%, then what is the value of the firm? Remember to add the Terminal Value (growing constantly at 5%) to the Year 5 Annual Cash Flow to find the Terminal Cash Flow, and then find the NPV.

Select one:

a. $2.115 Billion

b. $1.289 Billion

c. $2.897 Billion

d. $2.129 Billion

e. $1.142 Billion

Reference no: EM132740743

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