Question

Jacksonville Co. had free cash flow of $200 million last year, and free cash flow is expected to grow at 5% next year and for all future years. Assuming the WACC is 15%, what is the firm's value of operations (in millions)? $2,316 $2,100 $1,896 $2,000 $2,206

Answer 1

Solution ! free cash flow , last year (FCF.) – $200 million Expected Growth rate (g) = 5% or 0,05 WACC = 150), or 0.15 Firm's value 7 operations » FCF. (1+g WALL- g $200 million (1+0.05) 0,15 0,05 $200 million (1.05) 0,10 1) $210 million 0,10

= $2,100 million so, the right option is $2,100