Bay Properties is considering starting a commercial real estate division. It has prepared the following four-year forecast
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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:
Year 1 Year 2 Year 3 Year 4 Free Cash Flow - $182,000 $12,000 $90,000 $151,000 Assume cash flows after year 4 will grow at 5% per year, forever. If the cost of capital for this division is 11%, what is the continuation value in year 4 for cash flows after year 4? What is the value today of this division?
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