Question

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. If the cost of capital for this division is 14%, what is the continuation value in year 4 for cash flows after year 4? What is the value today of thisdivision?


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  • CreatedAugust 06, 2014
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