O Secure https://ng.cengage.com/static/nbau .9781337395120&nbld-881585&snapshoti
ID: 2808144 • Letter: O
Question
O Secure https://ng.cengage.com/static/nbau .9781337395120&nbld-881585&snapshotid-881585&id-34154.. EE: Apps Bookmarks D course Materials McGraw-Hi. Connect 5% MINDTAP Ch 08: End-of-Chapter Problems- Basic Stock Valuation Mera e-Ha connect Homework a how to create pivot Search this course Assignment: Ch 08: End-of-Chapter Problems-Basic Stock Valuation Assignment Score. 62.50% Save Submilt Assignment for Grading Check My Work (1 remaining) eBook Problem Walk-Through O Value of Operations Kendra Enterprises has never paild 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 6%. The company's weighted average cost of capital is 18%. a. 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. b. Calculate the value of Kendra's operations. Do not round intermediate calculations. Round your answer to the nearest cent Check My Work (1 remaining)Explanation / Answer
Ans a) Terminal value = free cashflow * (1 + growth rate)/(wacc - growth rate)
= 100000 * 1.06/(.18 - .06)
= $883333.33
Ans b) value of operation = 80000/(1.18) + 100000/(1.18)^2 + 883333.33/(1.18)^2
= 67796.61 + 71818.44 + 634396.24
= $774011.29
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.