Question

The present value of free cash flows is $15 million and the present value of the horizon value is $100 million. Calculate the present value of the business.
A. $15 million
B. $100 million
C. $115 million
D. Cannot be determined.

Answer 1

Answer:

Option C, $115 million is the correct answer.

Explanation:

Given the present value (PV) of cash flow = $15 million

The present value of time horizon = $100 million

Now we have to calculate the present value (PV) of the business and this can be calculated by just adding the present value of free cash flows and the present value of horizon value.

The present value of the business = the present value (PV) of cash flow + The present value of the time horizon.

=  15 million + 100 million

= 115 million.

Therefore, option C. $115 million is correct.