the data is as follows: expected long-run growth rate: 5%, cost of equity is 10%, forecast...

the data is as follows: expected long-run growth rate: 5%, cost of equity is 10%, forecast horizon is 3 years, discounted (t=0) Terminal value = $500. Free cash flows to equity in year 1 is 100, year 2 is 150 and year 3 is 120. What is the value of the firm at today, i.e., t = 0?

Expert Solution

Value of the firm as per the table below = 680.69

Discount rate	10.0000%
Cash flows	Year	Discounted CF= cash flows/(1+rate)^year	Cumulative cash flow
-	0	-	-
100.000	1	90.91	90.91
150.000	2	123.97	214.876
120.000	3	90.16	305.034
500.000	3	375.66	680.69

jeff jeffy answered 9 months ago

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the data is as follows: expected long-run growth rate: 5%, cost of equity is 10%, forecast...

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