It's your first day on the job as a stockanalyst and you are trying to assess thevalue of Beacon Industries. Yourpredecessor built a financial model thatestimates cash flows for Beacon, but it onlyextends for 6 years. You know that in orderto get the total value of the company, youneed to add a so-called terminal value for allthe cash flows in years 7 and beyond. Thisperpetuity will be based on the Year 6 cashflow, which is $19 million. You know that thediscount rate that investors are using toassess Beacon is 9%, and you expect thecash flows to grow in perpetuity at 1.5%annually. If the PV of the 6-year cash flowmodel is $80 million, what is the total valueof Beacon?

Introduction: The term perpetuity is also an annuity wherein the series of payments would continue…

Answered: what is the total value

Business

Finance

what is the total value

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter21: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 5MC: David Lyons, CEO of Lyons Solar Technologies, is concerned about his firms level of debt financing....

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