Question
Before finalizing the deal, Christine needs to feel confident she is not overpaying. She estimates the cash flows Smith Brothers will generate over the next
Before finalizing the deal, Christine needs to feel confident she is not overpaying. She estimates the cash flows Smith Brothers will generate over the next 4 years and then estimates a terminal value in year 5 that represents the companys value into perpetuity. The total cash flows she calculates from the three divisions (commercial fishing, wholesale seafood sales, and retail/restaurant sales) are as follows: $100,000, $150,000, $200,000, $300,000, $3,300,000. If Christine has a cost of capital of 13 percent, how much are these future cash flows worth today?
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