1. Acme Medical Corp. is expecting the cash flows from 2018-2022 in the table below. After 2022 it is expecting growth in cash flow at an annual rate of 3%. The firm has determined that its weighted average cost of capital (discount rate) is 7%. Using the table below calculate the following:
   1. What is the present value of Acme's future cash flows using the discounted cash flow model?
   2. If the firm has 200,000 common shares outstanding, zero preferred shares, and debt with a market value of $10,000,000 what would be the value of each share?
   3. Now suppose the discount rate increases to 10%. How would your answers to a) and b) above change based on the new discount rate?

Year	Cash Flow
2018	500,000
2019	550,000
2020	620,000
2021	700,000
2022	800,000

Answer rating: 100% (QA)

To calculate the present value of Acmes future cash flows we will discount each cash flow to its pre... View the full answer