Use the Information for the Question(s)below

question 28

Essay

Use the information for the question(s)below.
You expect DM Corporation to generate the following free cash flows over the next five years: Beginning with year six,you estimate that DM's free cash flows will grow at 6% per year and that DM's weighted average cost of capital is 15%.
-Calculate the enterprise value for DM Corporation.

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Definitions:

Annual Dividend

A yearly payment made by a corporation to its shareholders, usually derived from the company's profits.

Rate of Return

The profit or shortfall on an investment over a predetermined period, expressed as a proportion of the investment's initial outlay.

Dividend Increase

An action by a corporation to raise the amount of dividends paid to its shareholders.

Constant Annual Dividend

A fixed dividend amount paid to shareholders every year, without variation.