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Company generated cash flows

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Problem: Assume that XYZ Company generated cash flows of $2.00 per share last year. XYZ's cost of capital is 12%. Estimate the value per share of XYZ for each of the following sets of assumptions.

1. No future growth is expected.

2. Constant future growth of 6% is expected.

3. Growth of 10% per year is expected for the next three years, followed by constant growth of 6%.

4. Growth is expected to decline from 10% to 6% over the next four years, and then continue at 6%.

5. Growth of 10% per year is expected for the next two years, declining to 6% over the next four years, and then continuing at 6%.

6. Growth is expected to be 12% in year one, 11% in year two, 10% in year three, then decline to 6% over the next four years, and then continue at 6%.

Reference no: EM132434011

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