Question

You forecast the free cash flows for your target firm over the next five years. The final cash flow, at the end of year five, is projected to be $200 million.

Assuming a FCF terminal growth rate of 3% and an overall discount rate of 12%, what is the present valueof all future cash flows after the planning period? (Hint: do not forget to discount to today.)

Answer 1

- Free cash Flow at the end of year 5(FCF5) = $200 million

FCF Terminal Growth rate(g) = 3%

Discount rate(r) = 12%

Calculating the Present Value of all future cash flows after the planning period:-

Present value = $1298.777 millions

So, the present valueof all future cash flows after the planning period is $1298.78 millions

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