Question

Extensive Enterprise Inc. is expected to generate a free cash flow (FCF) of $13,720.00 million this year (FCF₁ = $13,720.00 million), and the FCF is expected to grow at a rate of 25.00% over the following two years (FCF₂ and FCF₃). After the third year, however, the FCF is expected to grow at a constant rate of 3.90% per year, which will last forever (FCF₄). Assume the firm has no nonoperating assets.

Answer 1

The question is about the future cash flows (FCF) of Extensive Enterprise Inc. The FCF for the current year (FCF₁) is $13,720.00 million, and it is expected to grow at different rates over the next few years. after the third year, the FCF is expected to grow at a constant rate indefinitely. To calculate the future values, we can use the formula: Future Value = Present Value × (1 + Growth Rate)^Number of Years.

Step-by-step explanation:

The question is about the future cash flows (FCF) of Extensive Enterprise Inc. The FCF for the current year (FCF₁) is $13,720.00 million. It is expected to grow at a rate of 25.00% in the following two years (FCF₂ and FCF₃). After the third year, the FCF is expected to grow at a constant rate of 3.90% per year indefinitely (FCF₄). Assuming no nonoperating assets, the question asks about the future values of the FCF. To calculate the future values, we can use the formula: