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# Answer on Abstract Algebra Question 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
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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