Barnette Inc

question 34

Multiple Choice

Barnette Inc.'s free cash flows are expected to be unstable during the next few years while the company undergoes restructuring.However, FCF is expected to be $50 million in Year 5, i.e., FCF at t = 5 equals $50 million, and the FCF growth rate is expected to be constant at 6% beyond that point.If the weighted average cost of capital is 12%, what is the horizon value (in millions) at t = 5?

• A) $719
• B) $757
• C) $797
• D) $839
• E) $883

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Definitions:

Future Benefits

The anticipated positive outcomes or returns that are expected to be received in the future as a result of current investments or actions.

Liabilities

Financial obligations or debts owed by a business to others, such as loans, accounts payable, and mortgages, which need to be settled over time.

Long-Term Decisions

Decisions made by management that are expected to have implications for the company over several years, often relating to strategic planning, investments, and organizational structure.

Fixed Costs

Rent, salaries, and insurance are examples of expenses unaffected by changes in production or sales levels.