A company forecasts free cash flows in one year to be (negative) -$10 Million and free cash flow in two years to be $20 Million. After the second year, free cash flow will grow at a constant rate of 4% per year for the foreseeable future. If the overall cost of capital is 14%, what is the current value of the operations?© BrainMass Inc. brainmass.com May 20, 2020, 3:31 pm ad1c9bdddf
The current value of operations is the present value of the free cash flows (FCF). From second year onwards the cash flows will grow at a constant rate. We can find the PV of all the cash flows from year 3 ...
The solution explains how to determine the current value of operations with step-by-step calculations and the answer.