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Free cash flow valuation You are evaluating the potential purchase of a small business with...

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Finance

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Free cash flow valuation You are evaluating the potential purchase of a small business with no debt or preferred stock that is currently generating S42,500 of troo cash flow (FCF, = 542 500) On the basis of a review of similar-risk investment opportunites, you must eun an) 20% rate of return on the proposed purchase Because you are relatively uncertain about future cash flows you decide to estimate the firm's value using several possible assumptions about the growth rate of cash flows a. What is the firm's value if cash flows are expected to grow at an annual rate of 0% from now to infinity b. What is the firm's value if cash flows are expected to grow at a constant annual rate of 8% from now to infinity? c. What is the tom's value if cash flows are expected to grow at an annual rate of 12% for the first 2 yours followed by a constant annual rate of 8% hom your 30 Infinity a. Toto's value, WI cash Nows are expected to grow at an animal cate of o% from now to infinity ass Round to the nearest cant)

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