The Free Cash Flows (In Millions)shown Below Are Forecast by Parker

question 11

Multiple Choice

The free cash flows (in millions) shown below are forecast by Parker & Sons.If the weighted average cost of capital is 11% and FCF is expected to grow at a rate of 5% after Year 2, what is the Year 0 value of operations, in millions? Assume that the ROIC is expected to remain constant in Year 2 and beyond (and do not make any half-year adjustments) .

• A) $1, 456
• B) $1, 529
• C) $1, 606
• D) $1, 686
• E) $1, 770

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