Simpltar Co

question 14

Multiple Choice

Simpltar Co. is expected to grow rapidly in the next three years and then have no growth for the foreseeable future. The firm expects free cash flows of $9.1 million, $11.4 million, and $17.7 million over the next three years, and thereafter its cash flows will stay constant. The company has no nonoperating assets. If the appropriate WACC is 12 percent and debt of 44.5 million, what is the equity value of this business? (Round final answer to the nearest million.)

• A) $135 million
• B) $105 million
• C) $45 million
• D) $90 million

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Definitions:

Superego

The superego is a component of Sigmund Freud's psychoanalytic theory representing the internalized moral standards and ideals that we acquire from both parents and society; it strives to act in a socially appropriate manner.

Sigmund Freud

An Austrian neurologist and the founder of psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Dorsal Frontal Cortex

A region of the brain's frontal lobes associated with executive functions such as planning, reasoning, and impulse control.

Ventral Frontal Cortex

A part of the frontal lobe in the human brain, associated with risk management, emotion, and complex social processes.