2. Leak Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 11% and FCF is expected to grow at a rate of 5% after Year 2, what is the Year 0 value of operations, in millions? Assume that the ROIC is expected to remain constant in Year 2 and beyond (and do not make any half-year adjustments).
Year: 1 2
Free cash flow: -$50 $100
Terminal Value in year 2 = CF3/(Ke-g) where CF3 = cash flow in year 3 = 100X1.05 = 105 Ke = required return = 11% g = growth rate = 5% Terminal value in year 2 = 105/(11%-5%) = 1,770 e. $1,770
It’s obvious to say that our standards and expectations of living and working has changed drastically since the global pandemic…
APPROVED BY CLIENTS
Excellent work with every detail from the introduction to the conclusion including references , always on time , at the end we as customers are always satisfied . They may have some things missing , but you can always talk to them live and they can fixe the issue very fast .