1. VBM. A company's free cash flow forecasts are as follows: Year 1 = -$10 million, Year 2 = $20 million. After the second year, free cash flow will grow at a constant rate of 4% per year into the foreseeable future. If the overall cost of capital is 14%, calculate current value of operations?
$150.03 million
$16.67 million
$200.05 million
$208.00 million
$228.00 million
None of the above
2. Papa Roach Exterminators, Inc., has sales of $669,000, costs of $275,000, depreciation expense of $36,000, interest expense of $28,000, and a tax rate of 35 percent. If the firm paid out $76,000 in cash dividends. What is the addition to retained earnings?
A. $166,500
B. $202,500
C. $124,650
D. $138,500
E. $174,500