Suppose we're using a DCF model with 10 years worth of projections for a company with a
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Question:
Suppose we're using a DCF model with 10 years worth of projections for a company with a 9.5% cost of capital. We estimate that the company's free cash flow in Year 10 will be $350 million and that its cash flow will grow at 4% in perpetuity after that. The present value of the perpetuity value will equal:
a).$6.6 billion.
b).$2.7 billion.
c).$4.8 billion.
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