You forecast the future cash flow of Jaffe Ltd, a young growing company. You expect fast growth
Question:
You forecast the future cash flow of Jaffe Ltd, a young growing company. You expect fast growth through the first four years, at which time the company will mature and you expect it to grow by 2% per year forever more after. The following are the forecast cash flows: Year 1: $5 millionYear 2: $10 millionYear 3: $15 millionYear 4: $20 millionYear 5: $20.4 millionYear 6: $20.808 millionYear 7 onward: continued growth at 2% per year The discount rate is 8%.
What is the value of Jaffe today at Year 0?(Do not round intermediate calculations. Report your result in millions of dollars. Round the final answers to 2 decimal places. Omit $ sign and the word “million” in your response. For example, if your answer is $1,234,567 just write 1.23)
Essentials of Managerial Finance
ISBN: 978-0324422702
14th edition
Authors: Scott Besley, Eugene F. Brigham