The present value, today, of the terminal (perpetuity) value equity cash flow that begins in 7...

The present value, today, of the terminal (perpetuity) value equity cash flow that begins in 7 years is $6,700,000 assuming a cost of equity equal to 8%. The year 7 free cash flow (beginning of the growing perpetuity) is $550,000. What is the growth rate required for the continuation value (terminal value perpetuity) term? Use the mid-year discounting convention.

A	2.83
	b.	2.62%
	c.	3.14%
	d.	3.56%

Expert Solution

Answer is A) 2.83%

Formulae

jeff jeffy answered 2 years ago

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