It is January 2014. Google has offered to buy your internet startup. The Google negotiators...
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Accounting
It is January 2014. Google has offered to buy your internet startup. The Google negotiators and you both agree on the following expectations.
| Year | Expected free cash flow to the firm (end of year) |
| 2014 | 120,000 |
| 2015 | 180,000 |
| 2016 | 270,000 |
| 2017 | 360,000 |
| 2018 | 450,000 |
After 2018, free cash flows are expected to grow by 3% per year. Based on the riskiness of your industry, you think that your weighted average cost of capital is 15%.
You have bank loans worth $400,000 outstanding.
a) What is the terminal value, i.e., the present value of all free cash flows from 2019 to infinity expressed in 2018-dollars?
b) What is the total value of the company?
c) What is the value per share of common stock if you have 100,000 shares outstanding?
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