Kendra Enterprises has never paid a dividend. Free cash flow is projected to be

Question

Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 5%. The company's weighted average cost of capital is 17%.

What is the terminal, or horizon, value of operations? (Hint: Find the value of all free cash flows beyond Year 2 discounted back to Year 2.) Round your answer to the nearest cent.

$   

Calculate the value of Kendra's operations. Round your answer to the nearest cent. Round intermediate calculations to two decimal places.

$  

Explanation / Answer

Ans: Value=[80000/(1+0.17)^1]+[100000/(1+0.17)^2]+1/(1+0.17)^3[(100000+6%)/(0.17-0.06)] 80000*.8547+100000*.7305+(.6244)(963636) 743120

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