Phosfranc Inc

question 51

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. It is estimated 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

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Definitions:

Indifference Curve

A graphical representation in microeconomic theory of the combinations of two goods among which a consumer is indifferent.

Midterm Grade

An evaluative score or letter assigned to a student, reflecting their performance halfway through an academic term.

Horizontal Axis

In a graph or chart, the x-axis, representing the independent variable or the basis of comparison across the chart.

Indifference Curves

A graphical representation showing different combinations of two goods among which a consumer is indifferent.