Multiple Choice
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
Correct Answer:
Verified
Correct Answer:
Verified
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