Compute the Value of a Firm with Free Cash Flows

question 59

Multiple Choice

Compute the value of a firm with free cash flows of $9000,$7000,and $5000 over the next three years,a terminal firm value of $30,000 after three years,and the unlevered cost of capital is 10%.Assume that the interest rate tax shield is zero.

• A)$36,109
• B)$37,098
• C)$38,745
• D)$40,263
• E)$42,772

---

Definitions:

Scarce Resources

Resources that are limited in availability and are not sufficient to satisfy all the various ways a society wants to use them.

Efficient Market

a market hypothesis asserting that asset prices fully reflect all available information, making it impossible to consistently achieve higher returns.

Free Lunch

An expression indicating that it is impossible to get something for nothing, emphasizing that every choice involves a cost, even if it is not immediately apparent.

Opportunity Cost

The cost of foregone alternatives when one option is chosen over another.