Conundrum Mining Is Expected to Generate the Above Free Cash

question 13

Multiple Choice

Conundrum Mining is expected to generate the above free cash flows over the next four years, after which they are expected to grow at a rate of 5% per year. If the weighted average cost of capital is 11% and Conundrum has cash of $85 million, debt of $65 million, and 30 million shares outstanding, what is Conundrum's expected current share price?

• A) $12.61
• B) $16.40
• C) $20.18
• D) $20.81

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Definitions:

Association Techniques

Techniques in which respondents are presented with visual or auditory stimuli and asked to respond with the first association that comes to mind.

Theory

A system of ideas intended to explain something, based on general principles independent of the thing to be explained.

Projective Testing

A psychological assessment technique where subjects interpret ambiguous stimuli, revealing hidden emotions and internal conflicts.

Advantages

The favorable aspects or benefits associated with a particular situation, decision, or course of action.