Tin Roof's Net Cash Flows for the Next Three Years

question 19

Multiple Choice

Tin Roof's net cash flows for the next three years are projected at $72,000,$78,000,and $84,000,respectively.After that,the cash flows are expected to increase by 3.2 percent annually.The aftertax cost of debt is 6.2 percent and the cost of equity is 11.4 percent.What is the value of the firm if it is financed with 40 percent debt and 60 percent equity?

• A)$1,215,650
• B)$1,328,141
• C)$1,461,439
• D)$1,575,941
• E)$1,279,623

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Definitions:

Profit

The financial gain realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

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A beverage made from the extraction or pressing of the natural liquid contained in fruit.

Japanese Yen

The official currency of Japan, represented symbolically as ¥ and known for its role in international finance and trade.