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You are evaluating a prospective LBO investment and determine that the Year 5 free cash flow (FCF) estimate is $850 million. Additionally, based on related work you estimate that the appropriate discount rate is 8.5% and the long term growth rate is 3.5%. Based on the perpetuity growth method, the Terminal Value of the company is _________ in Year   Group of answer choices   a. $17.6 bn, year 5   b. $17.0 bn, year 6   c. $10.0 bn, year 5   d. $17.6 bn, year 6

You are evaluating a prospective LBO investment and determine that the Year 5 free cash flow (FCF) estimate is $850 million. Additionally, based on related work you estimate that the appropriate discount rate is 8.5% and the long term growth rate is 3.5%. Based on the perpetuity growth method, the Terminal Value of the company is _________ in Year   Group of answer choices   a. $17.6 bn, year 5   b. $17.0 bn, year 6   c. $10.0 bn, year 5   d. $17.6 bn, year 6

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter23: Corporate Restructuring
Section: Chapter Questions
Problem 10P
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You are evaluating a prospective LBO investment and determine that the Year 5 free cash flow (FCF) estimate is $850 million. Additionally, based on related work you estimate that the appropriate discount rate is 8.5% and the long term growth rate is 3.5%. Based on the perpetuity growth method, the Terminal Value of the company is _________ in Year

 

Group of answer choices

 

a. $17.6 bn, year 5

 

b. $17.0 bn, year 6

 

c. $10.0 bn, year 5

 

d. $17.6 bn, year 6

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