Compute the Value of a Firm with Free Cash Flows

question 3

Multiple Choice

Compute the value of a firm with free cash flows of $4,000, $4,500, and $5,000 over the next three years, a terminal firm value of $60,000 after three years, and the unlevered cost of capital is 10%. Assume that the interest rate tax shield is zero.

• A) $56,191
• B) $57,234
• C) $58,098
• D) $59,123

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Definitions:

Electrophilic Aromatic Substitution

A reaction where an electrophile replaces a hydrogen atom in an aromatic ring, a common mechanism in aromatic chemistry.

Sigma Complex

An intermediate in certain chemical reactions characterized by a fully saturated carbon atom bonded to a metal center.

Generic Electrophile

A broadly defined electron-deficient species capable of forming new bonds by accepting a pair of electrons from a nucleophile.

Electrophilic Iodination

A chemical reaction involving the addition of iodine to a substrate via an electrophilic attack.