Question
5. 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:
5. 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 | $168,000 | $10,000 | $99,000 | $247,000 |
Assume cash flows after year 4 will grow at 1% per year, forever.
a. If the cost of capital for this division is 18%, what is the continuation value in year 4 for cash flows after year 4? (Round to the nearest dollar.)
b. What is the value today of this division? (Round to the nearest dollar.)
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Gold And Debt An American Hand Book Of Finance With Over Eighty Tables And Diagrams Illustrative Of The Following Subjects The Dollar And Other Units Paper Money In The United States And Europe Gold And Silver In The United States And Europe
Authors: Fawcett William Lyman
1st Edition
1313124508, 9781313124508
