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Estimate the present value of the projected free cash flows

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Question - On January 1, 2016, shares of Company X trade at $6.50 per share, with 400 million shares outstanding. The company has net debt of $300 million. After building an earnings model for Company X, you have projected free cash flow for each year as follows:

Year

2016

2017

2018

2019

2020

2021

2022

FCF

110

120

150

170

200

250

280

Weighted average cost of capital - 10%

Long-term FCF growth rate - 3%

Estimate the present value of the projected free cash flows through 2022, discounted at the stated WACC. Assume all cash flows are generated at the end of the year (i.e., no mid-year adjustment):

A. $ 624.1 million

B. $ 1,117.8 million

C. $ 693.3 million

D. $ 837.0 million

Reference no: EM131976670

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