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Gonzales Corporation Generated Free Cash Flow of $88 Million This

Question 3

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Gonzales Corporation generated free cash flow of $88 million this year.For the next two years,the company's free cash flow is expected to grow at a rate of 8%.After that time,the company's free cash flow is expected to level off to the industry long-term growth rate of 4% per year.If the weighted average cost of capital is 10% and Gonzales Corporation has cash of $100 million,debt of $300 million,and 100 million shares outstanding,what is Gonzales Corporation's expected terminal enterprise value in year 2?


A) $1,779.15
B) $1,641.60
C) $1,579.15
D) $1,441.60

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