Income Approaches: You Are Using the FCFC Approach to Value

question 73

Multiple Choice

Income approaches: You are using the FCFC approach to value a business. The estimated FCFC for next year will be $13.6 million, and it will increase at a rate of 6 per cent for each of the following five years. After that point, the FCFC will increase at a rate of 3 per cent forever. If the WACC for this company is 8 per cent, what is it worth?

• A) $384 million
• B) 354 million
• C) $241 million
• D) $144 million

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