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Stock Valuation: A company has a four year FCF forecast as shown below.   After year 4, FCF...

Stock Valuation:

A company has a four year FCF forecast as shown below.   After year 4, FCF is expected to grow by 5% per year, forever.   The WACC is 8%.  What is the Value of Operations? SHOW EQUATIONS

year

1

2

3

4

FCF

-4

-6

10

20
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Homework Answers

Answer #1

Free cash flow for year 1 to 4 has been provided

Growth rate of FCF after year 4(g) = 5% per year forever

WACC = 8%

Calculating the Enterprise Value(ev) or Value of Operations:-

EV = -3.704 - 5.144 + 7.938 + 14.701 + 514.521

EV = $528.31

So, the Value of Operations? is $528.31

So, current value of operations for Dozier is $302.32 millions

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