(Answered) Y 1 2 3

Statistics

Year 1 2 3 4

Free cash flow $12 million $18 million $22 million $26 million

Australia Mining (AM) is expected to generate the above free cash flows over the next four years, after which they are expected to grow at a rate of 5% per year. If the weighted average cost of capital is 12%, what is AM's current value?

a.$305 million

b.$248 million

c.$215 million

d.$468 million

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