A Firm's Cash Flow This Year Was $2,000

question 5

Multiple Choice

A firm's cash flow this year was $2,000. Cash flows are expected to grow at 15% for the next three years and then taper off to a growth rate of 5% indefinitely. The firm is financed with 25% debt. The beta of the debt is 0.0, and the equity beta is 1.2. The expected return on the market is 10%, and the relevant risk-free rate is 5%.
-Refer to the information above. Calculate the fair market value of the firm.

• A)$6,443
• B)$70,978
• C)$60,684
• D)$58,342

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Definitions:

Contractions

The tightening and shortening of muscles, often referring to those of the uterus during labor.

Fetal Presentation

The position a fetus is in, in relation to the birth canal, during delivery. Common presentations include cephalic (head first), breech (feet or buttocks first), and shoulder.

Vertex

The highest point; in obstetrics, it refers to the top portion of the baby's head as it presents in the birth canal.

Breech

A fetal position where the baby is set to be born buttocks or feet first instead of the normal head-first position.