The Following Table Presents Forecasted Financial and Other Information for Havasham

question 35

Multiple Choice

The following table presents forecasted financial and other information for Havasham Industries:
What is an appropriate estimate of Havasham's terminal value as of the end of 2014,using a warranted price-to-earnings multiple as your estimate?
$$\begin{array} { l r r r } & 2012 & 2013 & 2014 \\\hline \text { Projected EBIT } & \$ 317 & \$ 339 & \$ 363 \\\text { Earnings after tax } & 197 & 210 & 225 \\\text { Free cash flow } & 135 & 144 & 155 \\& & & \\\text { Havasham's WACC } & 8.2 \% & & \\\text { Expected growth rate in FCFs after 2014 } & 4.0 \% & & \\\text { Warranted MV firm } / \text { FCF in } 2014 & 19.4 & & \\\text { Warranted P/E in } 2014 & 18.7 & & \\\hline\end{array}$$

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Definitions:

Tight Junction

A complex of proteins in the cell membrane that creates a watertight seal between cells, preventing leakage of extracellular fluid.

Impermeable Barrier

A material or structure that does not allow fluids or gases to pass through it.

Epithelial

Refers to the type of tissue that lines the cavities and surfaces of blood vessels and organs throughout the body.

Muscular

Relating to or affecting the muscles in the body.