Bay Properties is considering starting a commercial real estate division. It has prepared the following four-year forecast

Question:

Bay Properties is considering starting a commercial real estate division. It has prepared the following four-year forecast of free cash flows for this division:

Assume cash flows after year 4 will grow at 3% per year, forever. If the cost of capital for this division is 14%, what is the continuation value in year 4 for cash flows after year 4? What is the value today of thisdivision?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...