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a. $1,714,750
b. $1,805,000
c. $1,900,000
d. $2,000,000
e. $2,100,000
2. Leak Inc. forecasts the free cash flows (in millions) shown below. If
the weighted average cost of capital is 11% and FCF is expected to grow
at a rate of 5% after Year 2, what is the Year 0 value of operations, in
millions? Assume that the ROIC is expected to remain constant in Year
2 and beyond (and do not make any half-year adjustments).
Year: 1 2
Free cash flow: -$50 $100
a. $1,456
b. $1,529
c. $1,606
d. $1,686
e. $1,770
3. Based on the corporate valuation model, the value of a company’s
operations is $1,200 million. The company’s balance sheet shows $80