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Important Information About Value of Operations

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Brooks Enterprises has never paid a dividend. Free cash is projected to be $80,000 and $100,000 for the next 2 years respectively, and after the second year it is expected to grow at a constant rate of 8%. The company's weighted average cost of capital is WACC=12%

a) What is the terminal or horizon value of operations?
b) Calculate the value of Brooks operations.

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The solution explains how to calculate the value of operations.

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a) What is the terminal or horizon value of operations?

Terminal value is the present value of FCF after the constant growth rate which is from year 3 onwards. The ...

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