Question 4\

0.6pts

\ (BD 8-19) 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:\ \\\\table[[Year,1,2,3,4],[\\\\table[[Free Cash],[Flow]],

-$185,000

,

$12,000

,

$99,000

,

$240,000

(BD 8-19) 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: Assume cash flows after year 4 will grow at 3% per year, forever, and that the cost of capital for this division is 14%. (All cash flows occur at the end of the year, and the new division will be all-equity financed.) a) What is the expected free cash flow in year 5? b) What is the continuation value in year 4 for cash flows after year 4 ? c) What is the value today of this division? (BD 8-19) 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: Assume cash flows after year 4 will grow at 3% per year, forever, and that the cost of capital for this division is 14%. (All cash flows occur at the end of the year, and the new division will be all-equity financed.) a) What is the expected free cash flow in year 5? b) What is the continuation value in year 4 for cash flows after year 4 ? c) What is the value today of this division