The Following Table Presents Forecasted Financial and Other Information for Havasham

question 20

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 multiple of free cash flow as your estimate?
$$\begin{array} { l r r r } & 2012 & 2013 & 2014 \\\hline \text { Projected EBIT } & \$ 317 & \$ 339 & \$ 363 \\\text { Earnings after tax } & 197 & 210 & 225 \\\text { Free cash flow } & 135 & 144 & 155 \\& & & \\\text { Havasham's WACC } & 8.2 \% & & \\\text { Expected growth rate in FCFs after } 2014 & 4.0 \% & & \\\text { Warranted MV firm } / \mathrm { FCF } \text { in } 2014 & 19.4 & & \\\text { Warranted } \mathrm { P } / \mathrm { E } \text { in } 2014 & 18.7 & & \\\hline\end{array}$$

• A) $155 million
• B) $2,898.5 million
• C) $3,007.0 million
• D) $4,365.0 million
• E) $7,042.2 million

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