Compute Free Cash Flow given the following information:
EBIT = $35,000,000
Interest Expense = 1,000,000
Depreciation Expense = 7,500,000
Taxes = 10,000,000
Capital Expenditures = 10,000,000
a) $32,500,000
b) $21,500,000
c) $22,500,000
d) $0
2) Estimate the value of a stock using the following information:
Required Rate of Return: 9%
Growth rate of Free Cash Flow for the first 3 years: 5%
Growth rate of Free Cash Flow after 3 years in perpetuity: 3%
Most recent Free Cash Flow: $60,000,000
a) $1,000,000,000
b) $1,166,505,462
c) $1,500,000,000
d) $1,061,008,132