Financial Management: Theory & Practice
Financial Management: Theory & Practice
16th Edition
ISBN: 9781337909730
Author: Brigham
Publisher: Cengage
Question
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Chapter 22, Problem 2P

a

Summary Introduction

To compute:

Horizon value of unlevered operations

b

Summary Introduction

To compute:

Total value of unlevered operations

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Richter Manufacturing has a 10% unlevered cost of equity. Richter forecasts the following free cash flows (FCFs), which are expected to grow at a constant 3% rate  after Year 3.     Year 1 Year 2 Year 3 FCF $715 $750 $805 a. What is the horizon value of the unlevered operations? b. What is the total value of unlevered operations at Year 0?
Richter Manufacturing has a 10% unlevered cost of equity. Richter forecasts the following free cash flows (FCFs), which are expected to grow at a constant 5% rate after Year 3.   Year 1  Year 2  Year 3  FCF $760  $790  $855    What is the horizon and total value?
Misra Inc. forecasts a free cash flow of $55 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5.5% thereafter. If the weighted average cost of capital (WACC) is 10.0% and the cost of equity is 15.0%, then what is the horizon, or continuing, value in millions att = 3? a. $1,212 b. $1,083 O c. $1,186 O d. $1,148 O e. $1,289
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