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A company is expected to generate $50 million cash flow next year and the cash flow...

A company is expected to generate $50 million cash flow next year and the cash flow is predicted to grow at 3% each year. Assume the required return for the company is 11%. What is the estimated intrinsic value of the company?

Select one:

a. $575 million

b. $600 million

c. $625 million

d. $600 million

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Answer #1

Ans c. $625 million

Intrinsic value of the company = Annual Cash Flow / (Required Return rate- Growth rate)
Intrinsic value of the company = 50 / (11% - 3%)
Intrinsic value of the company = 625.00
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