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3). Using the following free cash flow data: Year Cash Flow 2019 $3,000,000 2020 $3,400,000 a. Calculate the growth in cash flow between 2019
3). Using the following free cash flow data: Year Cash Flow 2019 $3,000,000 2020 $3,400,000 a. Calculate the growth in cash flow between 2019 and 2020 b. Prepare a 5 year cash flow forecast based upon the rate of growth in cash flow (2021- 2025) c. Calculate the net present value of the forecasted cash flows assuming an investment cost of $18,500,000 in the beginning of 2021 Estimate cost of capital using the following data: Market value of debt - $600,000 Market value of equity - $1,400,000 Current yield on debt - 7.3% Tax rate - 35% Expected market return - 12% Current 10 year US Treasury -3.8% Beta - 2.1 d. State your opinion on whether you would make the investment and why?
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Solution a The growth in cash flow between 2019 and 2020 is calculated as follows Growth in Cash Flo...Get Instant Access to Expert-Tailored Solutions
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