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Question
Discounted cash flows valuation model. Smoothtone Products manufactures sound systems. The company's weighted average cost of capital is 12 percent. The company forecasted the following free cash flows for the next 20 years.
Year Free Cash Flows
1 $10,000,000
2 15,000,000
3 20,000,000
4 23,000,000
5 25,000,000
6-10 20,000,000 per year
11-20 17,000,000 per year
Use the discounted cash flow approach to value the Smoothtone Products Company.
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