Current and projected free cash flows for Radell Global Operations are shown below. Growth is expected to be constant after 2007. The weighted average cost of capital is 11 percent. What is the horizon, or continuing, value at 2007?
2005 2006 2007 2008
$606.82 $667.50 $707.55 $750.00
Free cash flow
(Millions of dollars)
Vop at 2007 = $15,000
The solution calculates the Horizon, or continuing Value.