Valuation of free cash flows and value of the firm

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Valuation of Free Cash Flows and Value of the Firm using Constant Growth Model.

As a part of the Final project Assignment, on Tuesday, December 2, 2008, of this week you will do the Valuation using Free Cash Flows (FCF). The following free cash flows (in $ Million) are projected for the next five years. The free cash flows are expected to grow at a stable rate of 7% for every year after year 5. The opportunity cost of capital is 10%. Calculate the current value of the firm using the constant growth model after year 5. As a first step calculate the terminal value of the firm at the end of year 5.

Year Year 1 Year 2 Year 3 Year 4 Year 5

Free Cash Flow 5 12 24 44 69

Reference no: EM1311001

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