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Assuming ABC Ltd’s free cash flow is R45 000 in year one and grows at a constant rate of 5% p.a. for years 2 through to year 5. After year 5 the free cash flows grow at 3% into perpetuity. Calculate the present value of the “terminal value” free cash flow (excluding the present value of cash flows for years 1 to 5). The cost of capital for ABC Ltd is 12%. Assume cash flows are earned at the end of the period. Use full years in your discounting calculations. Group of answer choices R317,143 R362,373 R355,201 R424,308

Assuming ABC Ltd’s free cash flow is R45 000 in year one and grows at a constant rate of 5% p.a. for years 2 through to year 5. After year 5 the free cash flows grow at 3% into perpetuity. Calculate the present value of the “terminal value” free cash flow (excluding the present value of cash flows for years 1 to 5). The cost of capital for ABC Ltd is 12%. Assume cash flows are earned at the end of the period. Use full years in your discounting calculations. Group of answer choices R317,143 R362,373 R355,201 R424,308

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Assuming ABC Ltd’s free cash flow is R45 000 in year one and grows at a constant rate of 5% p.a. for years 2 through to year 5. After year 5 the free cash flows grow at 3% into perpetuity. Calculate the present value of the “terminal value” free cash flow (excluding the present value of cash flows for years 1 to 5). The cost of capital for ABC Ltd is 12%. Assume cash flows are earned at the end of the period. Use full years in your discounting calculations.

 

Group of answer choices

R317,143

R362,373

R355,201

R424,308

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