Phosfranc Inc

question 85

Multiple Choice

Phosfranc Inc. is valuing the equity of a company using the free cash flow from equity, FCFE, approach and has estimated that the FCFE in the next three years will be $6.25, $7.70, and $8.36 million respectively. Beginning in year 4, the company expects the cash flows to increase at a rate of 4 percent per year for the indefinite future. Phosfranc estimates that the cost of equity is 12 percent. What is the value of equity in this company? (Do not round intermediate computations. Round final answer to the nearest million.)

• A) $77 million
• B) $95 million
• C) $109 million
• D) $60 million

---

Definitions:

Correlational Studies

Research methods that examine the relationship between two or more variables to understand how they may influence one another.

Experimental Design

A methodology based on the scientific method that aims to ensure the validity and reliability of experimental results through control and randomness.

Positive Correlation

A relationship between two variables where if one variable increases, the other one also increases.

Epidemiology

A branch of medicine that investigates the various factors that contribute either to positive health or to the frequency and distribution of a disease or disorder.