1. Questions-DCF

2. Question (1)
You forecast the following cash flows stream for Resume Inc. for the next four years
What is the value (share price) of this company?
If share price is $140, would you like to buy it?
Year
Free Cash Flows 1
$100,000,000 2
$150,000,000 3
$200,000,000 4
$250,000,000
Number of Shares Outstanding
20,000,000

3. Question (2)
Let’s assume that growth rate of FCF is 2%, what is the terminal value of the firm at t=4?
With steady state growth rate of 2%, would you like to buy this company?
What if growth rate is 5%?

4. Question (3)
Given an interest rate of 6.2% per year? What is the value at date t=7 of perpetual stream of $3,500 payments that begin at date t=15?

5. Question (4)
You are planning to save for retirement over next 30 years:
$800 in stock account a month (10%)
$400 in bond account a month (6%)
How much can you withdraw each month from your account assuming 25-year withdrawal period? (let’s assume when you retire, you will combine your money into an account with a 7% return)