Richter Manufacturing has a 10% unlevered cost of equity. Richter forecasts the following free cash flows (FCFs), which are expected to grow at a constant 5% rate after Year 3. Year 1 Year 2 Year 3 FCF $760 $790 $855 What is the horizon and total value of the unlevered operations?

Richter Manufacturing has a 10% unlevered cost of equity. Richter forecasts the following free cash flows (FCFs), which are expected to grow at a constant 5% rate after Year 3. Year 1 Year 2 Year 3 FCF $760 $790 $855 What is the horizon and total value of the unlevered operations?

Entrepreneurial Finance

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ISBN:9781337635653

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Chapter10: Valuing Early-stage Ventures

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Question

Richter Manufacturing has a 10% unlevered cost of equity. Richter forecasts the following free cash flows (FCFs), which are expected to grow at a constant 5% rate after Year 3.

	Year 1	Year 2	Year 3
FCF	$760	$790	$855

What is the horizon and total value of the unlevered operations?

Definition Definition Cash that is left over after a company has paid for its operating and capital expenses. Unlike net income or earnings, free cash flow excludes non-cash expenses of the income statement and includes the expenditures on equipment and assets. Free cash flow also helps potential shareholders to evaluate how quickly the company can pay interest and dividends.

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