Use the Information for the Question(s)below

question 42

Multiple Choice

Use the information for the question(s) below.
Gonzales Corporation generated free cash flow of $88 million this year.For the next two years,the company's free cash flow is expected to grow at a rate of 8%.After that time,the company's free cash flow is expected to level off to the industry long-term growth rate of 4% per year.Suppose the weighted average cost of capital is 10% and Gonzales Corporation has cash of $100 million,debt of $300 million,and 100 million shares outstanding.
-What is Gonzales Corporation's expected terminal enterprise value in year 2?

• A)$1,779.15
• B)$1,641.60
• C)$1,579.15
• D)$1,441.60
• E)$1,378.35

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Definitions:

Series Connection

An electrical circuit configuration in which components are linked in a sequential manner, so the same current flows through each component without branching.

Frequency Source

An electronic component or circuit that generates a specific frequency or range of frequencies, often used in telecommunications and signal processing.

Capacitive Reactance

The measure of a capacitor's opposition to changes in voltage, affecting AC flow without dissipating energy, inversely proportional to the frequency.

Series Connection

A type of circuit configuration where components are connected end-to-end, and the current flows through one component to get to the next.