Exhibit 9-8
USE THE FOLLOWING INFORMATION IS FOR THE NEXT

question 105

Multiple Choice

Exhibit 9-8
USE THE FOLLOWING INFORMATION IS FOR THE NEXT PROBLEM(S)
At the end of the year 2009 the CKL Corporation had operating free cash flow (OFCF) of $300,000 and shares outstanding of 100,000. Total debt is currently $10,000,000. The company projects the following annual growth rates in OFCF $$\begin{array} { c c } \text { Year } & \text { Grawth Rate } \\\hline 2010 & 25 \% \\2011 & 20 \% \\2012 & 15 \% \\2013 & 10 \% \\2014 & 12 \% \\2015 & 14 \% \\2016 & 16 \% \\2017 & 198\end{array}$$
From year 2018 onward growth in OFCF is expected to remain constant at 5% per year. The stock has a beta of 1.1 and the current market price is $80. Currently the yield on 10-year Treasury notes is 5% and the equity risk premium is 4%. The firm can raise debt at a pre-tax cost of 9%. The tax rate is 25%. The proportion of equity is 55% and the proportion of debt is 45%.
-Refer to Exhibit 9-8. Calculate the present value now (Year 2009) of OFCF during the period of declining growth (that is for years 2010 to 2013) .

• A) $1,044,612
• B) $1,554,823
• C) $1,898,096
• D) $1,327,547
• E) $1,579,326

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Definitions:

Task-motivated Leaders

Leaders who are primarily focused on accomplishing set tasks and objectives, often prioritizing work completion over interpersonal relationships.

Ingratiating Tactics

Strategies aimed at gaining favor or acceptance from others through flattery, compliments, or acts of kindness.

Exchange Tactics

involve strategies used in negotiation or interaction to gain an advantage or achieve a desired outcome through the offering, withholding, or trading of resources or benefits.

Consultation

The process of getting advice or guidance from someone knowledgeable in a specific area.