You are given the following forecasted information for the year 2006: Sales $300,000,000; Operating profitability (OP)

Question:

You are given the following forecasted information for the year 2006: Sales $300,000,000;

Operating profitability (OP) 6%; Capital requirements (CR) 43%; Growth (g) 5%;

and the weighted average cost of capital (WACC) 9.8%. If these values remain constant, what is the horizon value (that is, the 2006 value of operations)? (Hint: Use Equation 12-3.)

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