Q1. Acme Corp. is expected to generate a free cash flow (FCF) of $9,080.00 million this year (FCF₁ = $9,080.00 million), and the FCF is expected to grow at a rate of 26.20% over the following two years (FCF₂ and FCF₃). After the third year, however, the FCF is expected to grow at a constant rate of 4.26% per year, which will last forever (FCF₄). Assume the firm has no non-operating assets. If Acme Corp.’s weighted average cost of capital (WACC) is 12.78%, what is the current total firm value of Acme Corp.? (Note: Round all intermediate calculations to two decimal places.) a. $150,504.74 million b. $27,141.27 million c. $204,104.42 million d. $180,605.69 million
Q1. Acme Corp. is expected to generate a free cash flow (FCF) of $9,080.00 million this year (FCF₁ = $9,080.00 million), and the FCF is expected to grow at a rate of 26.20% over the following two years (FCF₂ and FCF₃). After the third year, however, the FCF is expected to grow at a constant rate of 4.26% per year, which will last forever (FCF₄). Assume the firm has no non-operating assets. If Acme Corp.’s weighted average cost of capital (WACC) is 12.78%, what is the current total firm value of Acme Corp.? (Note: Round all intermediate calculations to two decimal places.) a. $150,504.74 million b. $27,141.27 million c. $204,104.42 million d. $180,605.69 million
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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Q1. Acme Corp. is expected to generate a free cash flow (FCF) of $9,080.00 million this year (FCF₁ = $9,080.00 million), and the FCF is expected to grow at a rate of 26.20% over the following two years (FCF₂ and FCF₃). After the third year, however, the FCF is expected to grow at a constant rate of 4.26% per year, which will last forever (FCF₄). Assume the firm has no non-operating assets. If Acme Corp.’s weighted average cost of capital (WACC) is 12.78%, what is the current total firm value of Acme Corp.? (Note: Round all intermediate calculations to two decimal places.)
a. $150,504.74 million
b. $27,141.27 million
c. $204,104.42 million
d. $180,605.69 million
Q2. Acme Corp.’s debt has a market value of $112,879 million, and Acme Corp. has no preferred stock . If Acme Corp. has 225 million shares of common stock outstanding, what is Acme Corp.’s estimated intrinsic value per share of common stock? (Note: Round all intermediate calculations to two decimal places.)
a. $501.68
b. $167.23
c. $183.95
d. $166.23
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