Q. 13-3 Horizon Value:
Current and projected free cash flows for Radell Global Operations are shown below. Growth is expected to be constant after 2012 and the weighted average cost of capital is 11%. Illustrate what is the horizon (continuing) value at 2012?
Actual Projected
2010 2011 2012 2013
Free cash flow $606.82 $667.50 $707.55 $750.00
(Millions of dollars)
EROIC and MVA of Constant Growth Firm:
A company has capital of $200 million. It has an EROIC of 9%, forecasted constant growth of 5% and a WACC of 10%. Illustrate what is its value of operations? Illustrate what is its intrinsic MVA?