You expect ATM Corporation to generate the following free cash flows over the next five years:   Year 1 2 3 4 5 FCF ($ millions) 75 84 96 111 120   Beginning with year six, you estimate that ATMʹs free cash flows will grow at 6% per year and that ATMʹs weighted average cost of capital is 15%. The enterprise value of ATM corporation is closest to:   A. $1017.66 million   B. $314.98 million   C. $1413.33 million   D. $702.67 million

Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter21: Dynamic Capital Structures And Corporate Valuation
Section: Chapter Questions
Problem 9P
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You expect ATM Corporation to generate the following free cash flows over the next five years:

 

Year

1

2

3

4

5

FCF ($ millions)

75

84

96

111

120

 

Beginning with year six, you estimate that ATMʹs free cash flows will grow at 6% per year and that ATMʹs weighted average cost of capital is 15%. The enterprise value of ATM corporation is closest to:

  A.

$1017.66 million

  B.

$314.98 million

  C.

$1413.33 million

  D.

$702.67 million

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