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Simonyan Inc. forecasts a free cash flow of $40 million in Year
3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5%
thereafter. If the weighted average cost of capital is 10% and the cost of
equity is 15%, what is the horizon value, in millions at t = 3?
Answer
Question 26
Akyol Corporation is undergoing a restructuring, and its free
cash flows are expected to be unstable during the next few years.
However, FCF is expected to be $50 million in Year 5, i.e., FCF at t = 5
equals $50 million, and the FCF growth rate is expected to be constant at
6% beyond that point. If the weighted average cost of capital is 12%,
what is the horizon value (in millions) at t = 5?
Answer
Question 27
Which of the following does NOT always
increase a company’s market value?