Kinkead Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$18 million, but its FCF at t = 2 will be $40 million. After Year 2, FCF is expected to grow at a constant rate of 5% forever. If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions? Year: 1 2 Free cash flow: ($18) $40 (Round your answer to 2 decimal places.)
Kinkead Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$18 million, but its FCF at t = 2 will be $40 million. After Year 2, FCF is expected to grow at a constant rate of 5% forever. If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions? Year: 1 2 Free cash flow: ($18) $40 (Round your answer to 2 decimal places.)
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
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Question
Kinkead Inc.
| Year: | 1 | 2 |
| Free cash flow: | ($18) | $40 |
(Round your answer to 2 decimal places.)
Expert Solution
Step 1
Cashflow means inflow or outflow of cash. There are 2 types of cashflow i.e. positive cashflow and negative cashflow. Positive cashflow increases the cash and negative cashflow decreases the cash.
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