Question: An analyst is evaluating Ari Inc. and shared the following projected net cash flows for the next 10 years. Y1 1,000,000 Y2 1,000,000 Y3 1,150,000
An analyst is evaluating Ari Inc. and shared the following projected net cash flows for the next 10 years.
Y1 1,000,000
Y2 1,000,000
Y3 1,150,000
Y4 1,200,000
Y5 1,200,000
Y6 1,300,000
Y7 1,500,000
Y8 1,700,000
Y9 2,000,000
Y10 2,200,000
Ari expects to continue to grow infinitely using the CAGR of the 10-year forecast period.
Required
return relevant to Ari Inc. is at 12.1%.
What is the terminal value to be incorporated in the net cash flow to the firm computation?
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To calculate the terminal value we need to use the perpetuity growth model which assumes that t... View full answer
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