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The financial manager of the company SFT Inc. made the following forecasts concerning the free cash flow for years XX + 1 to XX + 4: Years Free cash flow XX+1 300 000 XX+2 375 000 XX+3 400 000 XX+4 380 000 According to the finance manager's forecast, the company's free cash flow is expected to increase at an annual rate of 5% from year XX + 5 for the foreseeable future. Knowing that the weighted average cost of capital after tax for this company is 15%, estimate: 1. The residual value of the company in year XX + 4 2. The overall value of the company

The financial manager of the company SFT Inc. made the following forecasts concerning the free cash flow for years XX + 1 to XX + 4: Years Free cash flow XX+1 300 000 XX+2 375 000 XX+3 400 000 XX+4 380 000 According to the finance manager's forecast, the company's free cash flow is expected to increase at an annual rate of 5% from year XX + 5 for the foreseeable future. Knowing that the weighted average cost of capital after tax for this company is 15%, estimate: 1. The residual value of the company in year XX + 4 2. The overall value of the company

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
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The financial manager of the company SFT Inc. made the following forecasts concerning the free cash flow for years XX + 1 to XX + 4:

Years Free cash flow
XX+1 300 000
XX+2 375 000
XX+3 400 000
XX+4 380 000


According to the finance manager's forecast, the company's free cash flow is expected to increase at an annual rate of 5% from year XX + 5 for the foreseeable future. Knowing that the weighted average cost of capital after tax for this company is 15%, estimate:
1. The residual value of the company in year XX + 4
2. The overall value of the company

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