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Ted Corporation expects to generate free-cash flows of $200,000 per year for the next five...

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Finance

Ted Corporation expects to generate free-cash flows of $200,000 per year for the next five years. Beyond that time, free cash flows are expected to grow at a constant rate of 4 percent per year forever. If the firm's weighted average cost of capital is 20 percent, the market value of the firm's debt is $500,000, and Ted has a half million shares of stock outstanding, what is the value of Ted stock?
Select one:
a.
$1.24
b.
$2.22
c.
$2.43
d.
$1.79

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