Question

The table below shows the projected free cash flows of an acquisition target. Estimate the following:

a) Terminal value at the end of 2023 based on the perpetual growth equation with a 4% perpetual growth rate

b) Maximum acquisition price (MAP) as of the end of 2018 at a 9% discount rate

YEAR                                                                         2019    2020   2021   2022   2023
FREE CASH FLOW ($ thousands)                   -$500      $83    $87    $89     $92

The Present Value of $1 Table (Table 3) tells us:

Period (n)        Present Value Factor at 9% Discount Rate
1                                                          .917
2                                                          .842
3                                                          .772
4                                                         .708
5                                                          .650

NOTE: Please show the work for me to understand.

Answer 1