Allison's Is Expected to Have Annual Free Cash Flow of $62,000,$65,400,and

question 7

Multiple Choice

Allison's is expected to have annual free cash flow of $62,000,$65,400,and $68,900 for the next three years,respectively.After that,the free cash flow is expected to increase at a constant rate of 2 percent per year.At a discount rate of 14.5 percent,what is the present value of this firm?

• A)$469,118
• B)$603,509
• C)$577,088
• D)$524,467
• E)$497,364

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Definitions:

Index Fund

A type of mutual fund or exchange-traded fund designed to follow or track the components of a financial market index, such as the S&P 500.

Low P/E Ratios

Indicators that a company's stock is potentially undervalued, calculated by dividing the current market price by the earnings per share.

High P/E

A stock with a high price-to-earnings ratio, often indicating expectations of future growth or overvaluation.

Dividend Yields

An economic indicator demonstrating the yearly dividend distribution of a firm in comparison to its share price.