Free Cash Flow and Terminal Value Calculation for ABC Corp.

Very Hard Equity Valuation Applications Free Cash Flow Valuation

ABC Corp. is evaluating its free cash flow (FCF) for the next five years, with the following projected figures (in millions):

- Year 1: $50

- Year 2: $60

- Year 3: $70

- Year 4: $80

- Year 5: $90

After Year 5, the company expects a stable growth rate of 3%. The firm's weighted average cost of capital (WACC) is 8%.

Based on the above information, what is the present value of the free cash flow for the next five years and the terminal value at the end of Year 5?

Present Value of FCF = $258.72 million; Terminal Value = $1,800 million

Present Value of FCF = $342.29 million; Terminal Value = $1,800 million

Present Value of FCF = $328.59 million; Terminal Value = $1,500 million

Submitted4.5K

Correct2.6K

% Correct57%