Nico Corporation Expects to Generate Free-Cash Flows of $200,000 Per

question 177

Multiple Choice

Nico Corporation expects to generate free-cash flows of $200,000 per year for the next five years. Beyond that time, free cash flows are expected to grow at a constant rate of 5 percent per year forever. If the firm's average cost of capital is 15 percent, the market value of the firm's debt is $500,000, and Nico has a half million shares of stock outstanding, what is the value of Nico's stock?

• A) $2..43
• B) $3.43
• C) $1.43
• D) $0.00

---

Definitions:

Cilia

Hair-like structures on the surface of cells that move in a wave-like manner to transport materials and fluids or aid in mobility.

Flagella

Long, slender projections from a cell membrane that are used for locomotion in certain cells and unicellular organisms.

Ribosomes

Cell organelles that function as the site of protein synthesis in the process of translation.

Endoplasmic Reticulum

A network of membranes within a cell, involved in protein and lipid synthesis.