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NEW QUESTION: 1
Determine the enterprise value of a firm whose expected operating free cash flows are $100 each year and are growing with GDP at 2.5%. Assume its weighted average cost of capital is 7.5% annually.
A. $2,000
B. $4,000
C. $1,333
D. $1,000
Answer: A
Explanation:
Explanation
The operating free cash flows can be considered a perpetual annuity with a given growth rate.
The value of a perpetuity of a periodic cash flow of 'c', with a discount rate 'r' and growth rate 'g' is given by c/(r - g). In the given case, the company can be considered as providing a perpetual annuity which provides an annual cash flow of $100 which are growing at 2.5% (equal to the GDP's growth rate, as given), and whose cost of capital, or the discount rate to use, is 7.5% Therefore the value of the firm in this case is given by $100/(7.5% - 2.5%) = $2,000. Recall that the value of the firm is equal to the Operating Free Cash Flow/Weighted Average Cost of Capital (OFCF/WACC).
Therefore Choice 'd' is the correct answer.
NEW QUESTION: 2
Consider the following command:
perl runme.pl arg1 arg2 arg3
Given this command issued on the command line, what is the value of $#ARGV?
A. 0
B. 1
C. 2
D. 3
Answer: B
NEW QUESTION: 3
What do you use to create hierarchical structure between Foundation Objects?
Please choose the correct answer.
Response:
A. Business Rules
B. Associations
C. Propagations
Answer: B
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