Barnette Inc.'s free cash flows are expected to be unstable during the next few years while the company undergoes restructuring. However, FCF is expected to be $37.42 million in Year 5, i.e., FCF at t = 5 equals $37.42 million, and the FCF growth rate is expected to be constant at 4.74% beyond that point. If the weighted average cost of capital is 11%, what is the horizon value (in millions) at t = 5?
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Barnette Inc.'s
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