You Are Using the FCFF Approach to Value a Business

question 84

Multiple Choice

You are using the FCFF approach to value a business. The estimated FCFF for next year will be $13.6 million, and it will increase at a rate of 6 percent for each of the following five years. After that point, the FCFF will increase at a rate of 3 percent forever. If the WACC for this firm is 8 percent, what is it worth? (Round final answer to the nearest million.)

• A) $301 million
• B) $354 million
• C) $241 million
• D) $144 million

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Definitions:

Symbolic Interactionism

A sociological perspective that focuses on how individuals interpret and give meaning to social interactions and symbols.

Social Situations

Circumstances that involve interactions between individuals in a societal setting.

Behaviors

Actions or reactions of an individual or group in response to external or internal stimuli, which can be observed and measured objectively.

Praxis

The process by which theory, lesson, or skill is enacted, embodied, or realized.