Question
An analyst is making an estimate of the total market value of a firm. The analyst has forecast end of period total combined cash flows
An analyst is making an estimate of the total market value of a firm. The analyst has forecast end of period total combined cash flows available to the debt and equity holders over the next four years shown in the table below. However, the analyst plans to capture the value of all total combined cash flows beyond year four using the assumption of constant growth of cash flows after that time and applying the terminal value technique to estimate their present value at the end of year four. The analyst estimates the firm's WACC to be 9.5% and the constant growth to be 1%. Using this information, the analyst's estimate of firm total market value today is: OFF Year 1 $1170 Year 2 $1350 Year 3 $1460 Year 4 $1660
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