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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: Assume

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:

Assume cash flows after year 4 will grow at 4% per year, forever. If the cost of capital for this division is 12%, what is the continuation value in year 4 for cash flows after year 4?

In $ millions

Y1

Y2

Y3

Y4

FCF

200

250

175

170

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