urrent and projected free cash flows for Radell Global Operations are shown below.
| Actual 2013 |
2014 | Projected 2015 |
2016 | |
| Free cash flow | $615.28 | $675.96 | $716.01 | $766.13 |
| (millions of dollars) |
Growth is expected to be constant after 2015, and the weighted average cost of capital is 12%. What is the horizon (continuing) value at 2016 if growth from 2015 remains constant? Round your answer to the nearest dollar. Round intermediate calculations to two decimal places.
| ctual | 2014 | Projected | 2016 | |
| 2013 | 2015 | |||
| Free cash flow | $615.28 | $675.96 | $716.01 | $766.13 |
| (millions of dollars) | ||||
| Growth by amount | $60.68 | $40.05 | $50.12 | |
| (Current Year CF – Previous Year CF) | ||||
| Growth by % | $9.86 | $5.92 | $7.00 | |
| (Growth Amount*100/ Previous year Cf) |
We have been provided that growth is expected to be constant after 2015, and the weighted average cost of capital is 12%
growth is for the year 2015 is 7% as we calculate in the above table
,WACC is 12%,if growth is expected to be constant after 2015, then value at 2016 is as follow
=766.13/ 12-7
=766.13/5%
=$ 15,322.60
