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tiny-mole [99]
3 years ago
6

A company forecasts growth of 6 percent for the next five years and 3 percent thereafter. Given last year's free cash flow was $

100, what is its horizon value (PV looking forward from year 4) if the company cost of capital is 8 percent?
a. $0
b. $1,672
c. $2,000
d. $2,676
Business
1 answer:
Ilya [14]3 years ago
4 0

Answer:

d. $2,676

Explanation:

The computation of the horizontal value is shown below:

FCF1 = (100 × 1.06) = 106

FCF2  = (106 × 1.06) = 112.36

FCF3 = (112.36 × 1.06) = 119.1016

FCF4  = (119.1016 × 1.06) = 126.247696

FCF5  = (126.247696 × 1.06) = 133.8225578

Now

Horizon value is

= FCF5 ÷ (Cost of capital  - Growth rate)

= 133.8225578 ÷ (0.08  - 0.03)

= $2,676

Hence, the correct option is d.

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Suppose that without specialization, Iran produces 4 barrels of oil and 6 bottles of olive oil, and Iraq produces 4 barrels of o
Elza [17]

Answer:

With specialization Iran will be able to consume 1.7 bottles of olive oil.

Explanation:

Iran produces 4 barrels of oil and 6 bottles of olive oil.

Iraq produces 4 barrels of oil and 4 bottles of olive oil.

The opportunity cost of producing a barrel of oil for Iran

= \frac{6}{4}

= 1.5

The opportunity cost of producing a barrel of oil for Iraq

= \frac{4}{4}

= 1

Iraq has a lower opportunity cost for producing oil so we can say it has a comparative advantage in producing oil.

The opportunity cost of producing a barrel of olive oil for Iran

= \frac{4}{6}

= 0.66

The opportunity cost of producing a barrel of olive oil for Iraq

= \frac{4}{4}

= 1

Iran has a lower opportunity cost for producing olive oil so we can say it has a comparative advantage in producing it.

The terms of trade with specialization are 4 barrels of oil for 4.3 bottles of olive oil, and that 4 barrels of oil are indeed traded for 4.3 bottles of olive oil.

Without trade, Iran is consuming 4 barrels of oil and 6 bottles of olive oil.

With specialization, Iran will be able to consume

= 6 - 4.3

= 1.7 bottles of olive oil

6 0
3 years ago
Organizational portfolio plan, the final phase of the strategic planning process, involves?
Mnenie [13.5K]

The main purpose of organizational portfolio plan is to ensure that the high-level strategy that the organization is implementing translated to an actual workable plan that is measurable and specific enough to be executed by the relevant business functions responsible.

A gap between strategy and executed plans are a very common business problem to encounter in various industries. Thus, the best answer for the question is (A) identifying strategic business units (sbus) and establishing methods to determine how resources should be allocated among the various sbus.

3 0
3 years ago
Let's consider the effects of inflation in an economy composed of only two people: Bob, a bean farmer, and Rita, a rice farmer.
34kurt

Answer:

See below.

Explanation:

Lets first calculate inflation using the formula for Consumer Price Index

Inflation for a good = (Year 2 price - Year 1 price / Year 1 price) * 100

Using the above formula we can calculate inflation when Beans = $2 and Rice = $6.

Inflation for Beans = (2-1/1) * 100 = 100%

Inflation for Rice = (6-3/3) * 100 = 100%

Since each of them use rice and beans in equal proportions we assign them weights of 0.5 each,

Inflation Total = 0.5 * 100 + 0.5 * 100 = 100%

We assume Bob and Rita form a transnational relation and as such neither is worse off because the exchange rate between them remains the same,

Exchange rate before inflation = 3/1 = 3, Bob can buy 1 Rice by selling Rita 3 Beans.

Exchange rate after inflation = 6/2 = 3, so Bob can still buy 1 Rice by selling Rita 3 Beans.

B) For Prices 2 and 4 we use the above formulas,

Total Inflation = (2-1/1)*100*0.50 + (4-3/3)*100*0.50 = 66.66%

Bob is better off and Rita Worse off as the exchange rate for Bob has improved He can acquire 1 Rice for 4/2 = 2 Beans instead of 3 he needed before. Rita needs to sell him more to maintain her consumption but since they always consume same amount, she is worse off.

C) For Prices 2 and 1.5.

Total Inflation = (2-1/1)*100*0.50 + (1.5-3/3)*100*0.50 = (50-25) = 25%

Bob is now worse off and Rita better off as the Exchange rate change has favored Rita. Rita now only needs to sell 1 rice to obtain 2/1.5 = 1.3 units of Beans. Bob will have to sell more to maintain his initial consumption level.

D)

Bob and Rita are more concerned with their rate of exchange which is the change in real terms. As long as the changes are proportional and there are no third actors in the economy model, the 2 agents are not affected at all. What matters to them is their transnational rate and not inflation on the whole in this case.

Hope that helps.

5 0
3 years ago
Laird's project group in his communication class selected the topic of improving services for nontraditional students on campus.
dsp73

What phase is this group experiencing? The group is experiencing the emergence phase. In the emergence phase what the group is doing and experiencing becomes noticeable to those around them. The emergence stage is the longest stage of the four Fisher model, though the answers are still slightly uncertain, answers start to become clear.

3 0
3 years ago
When there is less money in
Drupady [299]

Answer:

the correct answer is

D all of the above

8 0
3 years ago
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