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The following table shows the projected free cash flows of an acquisition target. The potential...

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Finance

The following table shows the projected free cash flows of an acquisition target. The potential acquirer wants to estimate its maximum acquisition price at an 8 percent discount rate and a terminal value in year 5 based on the perpetual growth equation with a 4 percent perpetual growth rate.

Year 1 2 3 4 5
Free cash flow 880 440 0 248 796
  1. Estimate the targets maximum acquisition price.

Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.

  1. Estimate the targets maximum acquisition price when the discount rate is 7 percent and the perpetual growth rate is 5 percent.

Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.

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