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.

Answer the following questions to estimate the current value of firm T using the terminal value (aka horizon value) technique.

Cash flows, cost of capital, and growth rate for firm T

CF Year 1$12,100 Year 2 $13,500 Year 3 $16,300 Year 4 $18,400

WACC = 10%, g = 3% (assumed constant following year 4).

1.What is the terminal value of Firm T in Year 4?

2.What is the present value of the terminal value?

3.What is the present value of Year 1 - Year 4 cash flows?

4.Estimate the current value of firm T.