Borrower Corp

question 78

Multiple Choice

Borrower Corp.has the ability to produce $4,000,000 of free cash flow next year and expects that to grow by 2% per year thereafter.If Borrower's weighted average cost of capital is 13%,then what is the value of Borrower?

• A) $40,000,000.00
• B) $30,769,230.77
• C) $36,363,636.36
• D) none of the above

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Definitions:

Marginal Cost

The price associated with the creation of one more unit of a product or service.

Average Total Cost

The per-unit cost of production, calculated by dividing the total cost of production by the quantity of output produced.

Economic Profit

The difference between the total revenue generated by a business and the total costs, including both explicit and implicit costs.

Short-run Marginal Cost Curve

A curve that shows the change in total cost associated with producing one more unit of output in the short term.