Answer:
Brandtly Industries
The present value of the free cash flows projected during the next 4 years is $27,924,000 in total, details for each year are below:
Step-by-step explanation:
a) Data and Calculation of the Present Value of the Free Cash Flows:
Present Value of Projected Free Cash Flows
Free Cash Flow Discount Factor PV
Year 1: $4,000,000 0.909 $3,636,000
Year 2: $7,000,000 0.826 $5,782,000
Year 3: $11,000,000 0.751 $8,261,000
Year 4: $15,000,000 0.683 $10,245,000
Total $37,000,000 $27,924,000
b) To get the present value of the free cash flow for each year for Brandtly Industries, we discounted the free cash flow with their discount factors from the present value table at 10%, which is the weighted average cost of capital as given in the question.
The summation of the present values gives the total free cash flows projected for the next four years.