A Company Forecasts Growth of 6 Percent for the Next

question 4

Multiple Choice

A company forecasts growth of 6 percent for the next five years and 3 percent thereafter. Given last year's free cash flow was $100, what is its horizon value (PV looking forward from year 4) if the company cost of capital is 8 percent?

• A)$0
• B)$1,672
• C)$2,000
• D)$2,676

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Definitions:

Gasoline Fueled

Powered by gasoline, a petroleum-derived liquid that is used primarily as fuel in internal combustion engines.

Converter Dolly

A wheeled assembly equipped with a towing device that allows trailers to be coupled together into road trains, enhancing cargo transportation efficiency.

Semi-Trailer

A trailer without a front axle, designed to be towed by a road tractor, where a significant portion of its weight and that of its load is borne by the tractor.

Full Trailer

a trailer supported by wheels front and back, designed to be towed by a vehicle with a trailer hitch rather than being semi-supported by the towing vehicle itself.