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Free cash flow forecasts for the next four years are $50,000, $90,000, $70,000, and $100,000. There...

Free cash flow forecasts for the next four years are $50,000, $90,000, $70,000, and $100,000. There is a terminal value of $800,000. If the weighted average cost of capital is 12% then what is the value of the firm using the absolute valuation method if the terminal value of the firm (at the end of four years from today) is estimated to

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Answer #1
Year Cash Flow PV Factor PV Of Cash Flow
a b c=1/1.12^a d=b*c
1 $       50,000 0.89286 $           44,642.86
1 $       90,000 0.89286 $           80,357.14
3 $       70,000 0.71178 $           49,824.62
4 $   1,00,000 0.63552 $           63,551.81
4 $   8,00,000 0.63552 $       5,08,414.46
Value of firm $       7,46,790.89
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