Gere Furniture forecasts a free cash flow of $40 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5% thereafter. If the weighted average cost of capital is 10% and the cost of equity is 15%, what is the horizon (terminal) value of operations, in millions at t = 3? Show work in excel

Financial Management: Theory & Practice
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Chapter21: Dynamic Capital Structures And Corporate Valuation
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Gere Furniture forecasts a free cash flow of $40 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5% thereafter. If the weighted average cost of capital is 10% and the cost of equity is 15%, what is the horizon (terminal) value of operations, in millions at t = 3? Show work in excel

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In the Given question we are required to calculate the terminal value of operations in millions at t = 3 i.e. at the end of year 3.

 

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