Use the Following Information to Answer the Question(s)below

question 42

Multiple Choice

Use the following information to answer the question(s) below.
Taggart Transcontinental is considering adding a trucking division to expand the coverage of its existing rail lines.The trucking division will cost $1,000,000 and is expected to generate free cash flows of $100,000 for each of the next five years.Taggart Transcontinental forecasts that future free cash flows after year 5 will grow at 2% per year,forever.Taggart Transcontinental's cost of capital is 10%.
-The continuation value for the trucking division in year five is closest to:

• A)$1,000,000.
• B)$1,250,000.
• C)$1,275,000.
• D)$1,375,000.

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Definitions:

Trade Secret

Information that a company keeps confidential to maintain an advantage over competitors.

Public Plant Tour

An organized visit to a factory or industrial site that is open to the general public for educational or promotional purposes.

Trademark Dilution

The lessening of the distinctive quality of a trademark due to unauthorized use.

Customer Confusion

Uncertainty experienced by consumers, often due to similar branding or products, potentially leading to mistaken identity of businesses or items.