Selected data for the Derby Corporation are shown below. Use the data to answer the following questions.
INPUTS (In millions)		Year
		Current	Projected
		0	1	2	3	4
Free cash flow			-$20.0	$20.0	$80.0	$84.0
Marketable Securities		$40
Notes payable		$100
Long-term bonds		$300
Preferred stock		$50
WACC		9.00%
Number of shares of stock		40
a. Calculate the estimated horizon value (i.e., the value of operations at the end of the forecast period immediately after the Year-4 free cash flow). Assume growth becomes constant after Year 3.
		Current	Projected
		0	1	2	3	4
Free cash flow			-$20.0	$20.0	$80.0	$84.0
Long-term constant growth in FCF
WACC
Horizon value
Cash flows
b. Calculate the present value of the horizon value, the present value of the free cash flows, and the estimated Year-0 value of operations.
Value of operations (NPV of all the cash flows)