Exhibit 14 From Year 2019 Onward Growth in OFCF Is Expected to

question 47

Multiple Choice

Exhibit 14.8
Use the Information Below for the Following Problem(S)
At the end of the year 2010 the CKL Corporation had operating free cash flow (OFCF) of $300,000 and shares outstanding of 100,000. Total debt is currently $10,000,000. The company projects the following annual growth rates in OFCF
$$\begin{array} { c c } \text { Year } & \text { Grapth Rata } \\\hline 2011 & 25 \% \\2012 & 20 \% \\2013 & 15 \% \\2014 & 10 \% \\2015 & 12 \% \\2016 & 14 \% \\2017 & 16 \% \\2018 & 18 \%\end{array}$$
From year 2019 onward growth in OFCF is expected to remain constant at 5% per year. The stock has a beta of 1.1 and the current market price is $80. Currently the yield on 10-year Treasury notes is 5% and the equity risk premium is 4%. The firm can raise debt at a pre-tax cost of 9%. The tax rate is 25%. The proportion of equity is 55% and the proportion of debt is 45%.
-Refer to Exhibit 14.8.Calculate the intrinsic value of the stock now (Year 2010) .

• A) $155.55
• B) $173.27
• C) $196.44
• D) $207.79
• E) $108.30

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Definitions:

Immigrants

People who move to a foreign country with the intention of settling there, often in search of better living conditions, employment, or educational opportunities.

Chicago

A major city in the United States located in the state of Illinois, known for its significant contributions to music, architecture, and the arts.

Vaudeville Shows

A type of entertainment popular in the United States in the early 20th century, featuring a mix of specialty acts such as burlesque comedy, song, and dance.