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Korolek [52]
3 years ago
12

Gere Furniture forecasts a free cash flow of $40 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rat

e of 5% thereafter. If the weighted average cost of capital is 10% and the cost of equity is 15%, what is the horizon value, in millions at t = 3?a. $840b. $882c. $926d. $972e. $1,021
Business
1 answer:
LenKa [72]3 years ago
4 0

Answer:

Option (A) is correct

Explanation:

Given that,

Free cash flow in Year 3, FCF3 = $40 million

FCF to grow at a constant rate, g = 5%

Weighted average cost of capital, WACC = 10%

Cost of equity = 15%

Therefore,

Horizon Value at year, t = 3:

=\frac{FCF4}{(WACC-g)}

=\frac{FCF3(1+g)}{(WACC-g)}

=\frac{40(1+0.05)}{(0.10-0.05)}

=\frac{42}{0.05}

     = $ 840

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maw [93]

The need to choose one goods on a comparison of marginal benefits and marginal costs always involves an opportunity cost.

<h3>What is an opportunity cost?</h3>

This refers to a value of what is rejected in order to perform the chosen alternative.

Hence, the need to choose one goods on a comparison of marginal benefits and marginal costs always involves an opportunity cost.

Therefore, the Option D is correct.

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5 0
2 years ago
A strong project matrix is different from a weak matrix in that _____: a. In a strong project matrix the functional manager is s
hram777 [196]

Answer:

Option (b) is correct

Explanation:

The reason is that in the in a strong project matrix, the functional manager has decisions making authorities where’s the project manager has more power in terms of authority. He is able to make changes in his team to manage the time, cost and quality of work done.

4 0
3 years ago
Sinking fund cash or cash assets are set aside for a purpose of
IgorC [24]
Sorry you need a little more detail for your question.
5 0
3 years ago
The changes in account balances of the Vel Corporation during Year 6 are presented below: Increase Assets $356,000 Liabilities 1
zzz [600]

Answer:

b. $ 36,000

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Since the data provides that a dividend payment of $ 52,000 has been made, we have to add it to our differential balance to get the income for the year.

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6 0
3 years ago
Renee invested $2,000 six years ago at 4.5 percent interest. She spends her earnings as soon as she earns any interest so she on
tiny-mole [99]

Answer:

C. Simple interest.

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Simple interest is unlike compound interest. In compound interest, the interest earned in a period is added the deposit to make a larger principal amount. Renee is earning simple interest because her earnings are from the principal amount only. Since she is withdrawing her interests as they are earned, meaning her deposits remain the same. She is not allowing her earnings to be compounded with the principal amount to generate more earnings.

7 0
3 years ago
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