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It is January 1, 2020. Free cash flow for 2020, 2021, 2022, and 2023 are expected to be -$5,000; -$1,000; $5,000; and $15,000. Cash flow
It is January 1, 2020. Free cash flow for 2020, 2021, 2022, and 2023 are expected to be -$5,000; -$1,000; $5,000; and $15,000. Cash flow growth beyond 2023 is expected to stabilize at 10% for 2 years, beyond which point free cash flows are expected to grow at 4% in perpetuity. If the discount rate is 20%, what should be the value of the firm today if there is $1,000 excess cash? What should the enterprise value be (assuming the firm has no majority interest in a subsidiary)? Assume cash flows occur continuously throughout the year.
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