Company has the following cash flow stream. CF1 = 357 CF2 = 653 CF3 = 804...

Company has the following cash flow stream.

CF1 = 357

CF2 = 653

CF3 = 804

CF4 = 963

Cash flow is expected to be constant after year 4, with a growth rate of 4%. If the WACC is 10%, what is the Value of Operations (Firm Value) - Vop₀ today?

(Hint : The answer in my version is 14,370.44

Solutions

Expert Solution

Value of operations is equal to the present value of all future free cash flows

= 357/(1.1) + 653/(1.1)^2 + 804/(1.1)^3 + 963/(1.1)^4 + 963*(1.04)/(1.1)^4(10%-4%)

= $13,526.87

jeff jeffy answered 1 year ago

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