You have estimated that a company will generate net free cash flows to equity equal to 876,543,210 throughout the course of the year that ends 7 years from today

Finance Dec 19, 2020

You have estimated that a company will generate net free cash flows to equity equal to 876,543,210 throughout the course of the year that ends 7 years from today. Using the mid-year discounting rule, what is the present value of that cash flow if an equity discount rate of 11.6% is used? Round to the second decimal place.

Expert Solution

Net free cash flow to Equity = 876,543,210

Annual Cash Flow = 876,543,210 / 7

=125,220,459

PV factor @11.6% after 7 years = 4.397

PV of Free cash flow to Equity = 125,220,459 * 4.397

= 550,594,356

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