Answer to Question #19168 in Abstract Algebra for kathy butler

Question #19168
5. Vasudevan Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 13% and the free cash flows are expected to continue growing at the same rate after Year 3 as from Year 2 to Year 3, what is the Year 0 value of operations, in millions? Year: 1 2 3 Free cash flow: -$20 $42 $45 a. $586 b. $617 c. $648 d. $680 e. $714
1
Expert's answer
2012-11-29T08:17:41-0500
The right answer is D. 680 $
We used dividend growth model ( here is a pretty decent explanation of this
model), then NPV.
Finally we got NPV = -201,07 + 421,07^2 + 802,51,07^3

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