Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question

Transcribed Image Text:The table below gives the estimated free cash flow under the 0.26% growth scenario. Using these estimates and assuming a cost of capital of
9.8%, compute the value of KMS.
Year
Free Cash Flow (000)
Free Cash Flow of Firm
Continuation Value
2013
$7,666
2014
$5,796
2015
The value of KMS is $ thousand. (Round to the nearest integer.)
-$15,664
2016
$5,366
2017
$6,443
2018
D
$7,608
$222,332
The Tax Cuts and Jobs Act of 2017 temporarily allows 100% bonus depreciation (effectively expensing capital expenditures). However, we will still
include depreciation forecasting in this chapter and in these problems in anticipation of the return of standard depreciation practices during your
career.
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