Estimate a venture’s required rate of return based on the following information: terminal value = $400,000;...
Estimate a venture’s required rate of return based on the following information: terminal value = $400,000; current year’s net income = $20,000; next year’s expected cash flow = $25,000; and a constant growth rate = 7%.
Homework Answers
let me know if you need any clarification..
| required rate of return = next year cash flow/terminal value + growth rate | |||||||
| =25000/400000+7% | |||||||
| 13.25% | |||||||
| therefore answer = | 13.25% | ||||||
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Estimate a venture’s required rate of return based on the
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