Question
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: Free
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: Free Cash Flow Year 1 :-149,000 Year 2 :10,000 Year 3: 80,000 Year 4:171,000
Assume cash flows after year 4 will grow at 3% per year, forever. If the cost of capital for this division is 9% , what is the continuation value in year 4 for cash flows after year 4? What is the value today of this division?
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What is the continuation value in year 4 for cash flows after year 4? The continuation value is $ ?enter your response here. (Round to the nearest dollar.)
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