Value of Operations
Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next years, respectively, after the second year For is expected to grow at a constant rate of 9%. The company's weighted average cost of capital is 13%.
a. What is the terminal, or horizon, value of operations?
b. Calculate the value of Kendra's operations.
Given,
Free cash flow in 1 year (FCF1) = $80000
Free cash flow in 2 years (FCF2) = $100000
Growth rate (g) = 9% or 0.09
WACC (r) = 13% or 0.13
Solution :-
Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next years
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