Author Question: Ted Corporation expects to generate free-cash flows of 200,000 per year for the next five years. ... (Read 66 times)

magmichele12 · **on:** Jul 10, 2018

Ted Corporation expects to generate free-cash flows of 200,000 per year for the next five years. Beyond that time, free cash flows are expected to grow at a constant rate of 5 percent per year forever.

If the firm's average cost of capital is 15 percent, the market value of the firm's debt is 500,000, and Ted has a half million shares of stock outstanding, what is the value of Ted stock?
A) 2.43
B) 3.43
C) 1.43
D) 0.00

Question 2

The Rule of 72 is a rule of thumb for estimating the interest rate necessary to double your money, given a period of time.

Indicate whether the statement is true or false.