Gonzales corporation generated free cash flow of $88 million this year. for the next two years, the companyʹs free cash flow is expected to grow at a rate of 10%. after that time, the companyʹsfree cash flow is expected to level off to the industry long-term growth rate of 4% per year. ifthe weighted average cost of capital is 12% and gonzales corporation has cash of $100 million, debt of $300 million, and 100 million shares outstanding, what is gonzales corporationʹsexpected terminal enterprise value in year 2? a) $1384.24b) $1245.82c) $1107.39d) $968.97

option (A) $1,384.24

Explanation:

Given:

Free Cash Flow in Year 3 = $88 million

Expected growth rate = 10% = 0.1

Constant Growth Rate, gC = 4%

Gonzales Corporationʹsexpected terminal enterprise value in Year 2

=

=

Here,

FCF3 is the Free Cash Flow in Year 3

FCF3 is Free Cash Flow Now

=

= $1,384.24

Hence,

The correct answer is option (A) $1,384.24

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

being born in poverty would limit the people's chances, opportunities and benefits.

this happen because of several things, such as:

- poor people tend to gain less access to good education and nutrition. this mean that their chance to obtain high paying jobs would also be limited.

- poor people tend to socialize with other poor people while the rich tend to socialize with other rich people. this means that simply throguh their social circle, rich people would have more business opportunities compared to the poor people.

- rich people tend to have more capital in their disposal. this would benefit them in business since it is far easier for them to fund their business operation compared to poor people.