Current and projected free cash flows for Radell Global Operations are shown below. Growth is expected to be constant after 2012, and the weighted average cost of capital is 11%. What is the horizon (continuing) value at 2012?


  • avatar
    mathquestions12
    15 Aug 2012 02:08:57 GMT

     

     

      Actual  Projected
    Year 2010 2011 2012 2013
    Free Cash Flow 606.82 667.5 707.55 750

    The growth rate in FCF from 2009 to 2010 is g = ($750.00 - $707.55) ÷ $707.50 = 0.06
    Vop at 2009 = ((FCF(1 + g)) ÷ (WACC – g))
    Vop at 2009 = ($707.55(1.06)) ÷ (0.11 – 0.06)
    Vop at 2009 = $15,000

     

     


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