Compute the Value of a Firm with Free Cash Flows

question 52

Multiple Choice

Compute the value of a firm with free cash flows of $9 000, $7 000 and $5 000 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)$38 745
• B)$40 263
• C)$37 098
• D)$36 109

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Definitions:

Write-Offs

The deduction of an amount due (as an uncollectable debt) from an entity's revenue, thereby decreasing its income.

Insurance

A financial product that provides protection against financial losses, ensuring compensation for specified loss, damage, illness, or death in return for payment of a premium.

Accounts Payable

Liabilities of a company or organization due to purchases of goods and services to be paid to creditors or suppliers.

Adjustments

Adjustments are changes or modifications made to improve or correct something, often used in contexts ranging from accounting to spinal manipulation.