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:

Benchmark Portfolio

A standard or point of reference against which the performance of an investment portfolio can be measured.

M-Squared Measure

A measure used in finance to evaluate the performance of an investment portfolio by adjusting for its risk level compared to a benchmark.

Risk-Adjusted Return

This is a measure of how much risk is involved in generating a security's or portfolio's return, helping investors to compare the performance of different investments on a risk-adjusted basis.

Total Risk

The overall uncertainty associated with an investment, combining both systemic and idiosyncratic risks.