You expect CCM Corporation to generate the following free cash flows over the next five years:
Year 1 2 3 4 5
FCF ($ millions) 25 28 32 37 40
Following year five, you estimate that CCMʹs free cash flows will grow at 5% per year and that CCMʹs weighted average cost of capital is 13%.
1. The enterprise value of CCM corporation is closest to:
A) $396 million
B) $290 million
C) $382 million
D) $350 million
“2. If CCM has $150 million of debt and 12 million shares of stock outstanding, then the share price for CCM is closest to:
”
A) $49.50
B) $11.25
C) $20.50
D) $22.75
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