MGFB10H3 Final: (2)C03+Winter+2007+Test+and+Answer

Year 1 2 3 4 5 Free Cash Flow $21 million $25 million $28 million $32 million $32 million

XYZ Industries is expected to generate the above free cash flows over the next five years, after which free cash flows are expected to grow at a rate of 3% per year. If the weighted average cost of capital is 6% and XYZ has cash of $12 million, debt of $48 million, and 72 million shares outstanding, what is General Industries' expected current share price? Answer in millions and round to the nearest cent.

Your banker offers several borrowing alternatives. Which has the lowest effective rate?

Select one:

8.75% discount with a 15% compensating balance

9% with a 20% compensating balance

11% simple interest

A vendor offers you trade credit of 2/10, net 45. The value of the discount is the equivalent of ________%.

Select one:

15%

21%

32%

12%