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the data is as follows: expected long-run growth rate: 5%, cost of equity is 10%, forecast...

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Finance

the data is as follows: expected long-run growth rate: 5%, costof equity is 10%, forecast horizon is 3 years, discounted (t=0)Terminal value = $500. Free cash flows to equity in year 1 is 100,year 2 is 150 and year 3 is 120. What is the value of the firm attoday, i.e., t = 0?

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4.1 Ratings (447 Votes)

Value of the firm as per the table below = 680.69

Discount rate 10.0000%
Cash flows Year Discounted CF= cash flows/(1+rate)^year Cumulative cash flow
                               -   0                                            -                                           -  
                   100.000 1                                     90.91                                  90.91
                   150.000 2                                   123.97                             214.876
                   120.000 3                                     90.16                             305.034
                   500.000 3                                   375.66                                680.69

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the data is as follows: expected long-run growth rate: 5%, costof equity is 10%, forecast horizon is 3 years, discounted (t=0)Terminal value = $500. Free cash flows to equity in year 1 is 100,year 2 is 150 and year 3 is 120. What is the value of the firm attoday, i.e., t = 0?

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