General Industries Is Expected to Generate the Above Free Cash

question 24

Multiple Choice

$\begin{array}{lccccc}\text { Year } & 1 & 2 & 3 & 4 & 5 \\\text { Free Cash Flow } & \$ 22 \text { million } & \$ 26 \text { million } & \$ 29 \text { million } & \$ 30 \text { million } & \$ 32 \text { million }\end{array}$ General Industries is expected to generate the above free cash flows over the next five years, after which free cash flows are expected to grow at a rate of 3% per year. If the weighted average cost of capital is 8% and General Industries has cash of $10 million, debt of $40 million, and 80 million shares outstanding, what is General Industries' expected current share price?

• A) $7.67
• B) $9.48
• C) $6.60
• D) $6.72

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