Firm C is considering the acquisition of Firm T. Firm C has estimated the cash flows, cost of capital, and growth rate for firm T shown below. Using these estimates, estimate the current value of firm T using the terminal value (aka horizon value) technique.

Year 1 Year 2 Year 3 Year 4

CF $2,130 $2,420 $2,890 $3,210

WACC = 12%, g = 3% (assumed constant following year 4).

Check Answer: Estimated Firm Value Today = $31,275

Hint: After calculating the terminal value at year 4, just combine that number with the year 4 CF and that will be CF4 for the calculator input. You can then use the cash flow worksheet on your financial calculator to solve, just assume that CF0 = $0.