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Value of OperationsKendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 9%. The company's weighted average cost of capital is 16%. What is the terminal, or horizon, value of operations? (Hint: Find the value of all free cash flows beyond Year 2 discounted back to Year 2.) Round your answer to the nearest cent.$ Calculate the value of Kendra's operations. Round your answer to the nearest cent. Do not round intermediate calculations.$

Question

Value of Operations

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 9%. The company's weighted average cost of capital is 16%.

 

  1. 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.

    $

  2. Calculate the value of Kendra's operations. Round your answer to the nearest cent. Do not round intermediate calculations.

    $

 

check_circleAnswer
Step 1

The value of the firm is the present value of the future free cash flows which is discounted by the weighted average cost of capital

Step 2
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