Exhibit 9-8
USE THE FOLLOWING INFORMATION IS FOR THE NEXT

Exhibit 9-8
USE THE FOLLOWING INFORMATION IS FOR THE NEXT PROBLEM(S)
At the end of the year 2009 the CKL Corporation had operating free cash flow (OFCF) of $300,000 and shares outstanding of 100,000. Total debt is currently $10,000,000. The company projects the following annual growth rates in OFCF $$\begin{array} { c c } \text { Year } & \text { Grawth Rate } \\\hline 2010 & 25 \% \\2011 & 20 \% \\2012 & 15 \% \\2013 & 10 \% \\2014 & 12 \% \\2015 & 14 \% \\2016 & 16 \% \\2017 & 198\end{array}$$
From year 2018 onward growth in OFCF is expected to remain constant at 5% per year. The stock has a beta of 1.1 and the current market price is $80. Currently the yield on 10-year Treasury notes is 5% and the equity risk premium is 4%. The firm can raise debt at a pre-tax cost of 9%. The tax rate is 25%. The proportion of equity is 55% and the proportion of debt is 45%.
-Refer to Exhibit 9-8. Calculate the present value now (Year 2009) of OFCF during the period of declining growth (that is for years 2010 to 2013) .

A) $1,044,612
B) $1,554,823
C) $1,898,096
D) $1,327,547
E) $1,579,326