FIN 534 RANK Imagine Your Future /fin534rank.com FIN 534 RANK Imagine Your Future /fin534rank.com - Page 165
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?
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?
Which of the following does NOT always
increase a company’s market value?