You are considering purchasing Firm A. Firm A most recently generated free cash flow (FCF) of $200M last year, and you expect that to grow by 8% this year and for 3 years after that. After that, you estimate that Firm A will continue to grow at 5.5% in perpetuity. Firm A’s cost of capital is 11%. For simplicity, assume that all past cash flows have been paid out as dividends.

What is the expected free cash flow (FCF) at the end of 5 years from now?

Answer rating: 100% (QA)

The expected free cash flow FCF at the end of 5 years ... View the full answer