Discuss residual operating income techniques

Reference no: EM131491221

Question: Forecasting Free Cash Flows and Residual Operating Income, and Valuing a Firm (Medium) The following forecasts were prepared in 2012 for a firm with a cost of capital for its operations of 12 percent. Amounts are in millions of dollars.

The common stockholders' equity at the end of2012 is 596 and there is no net debt.

a. Forecast cash flow from operations and free cash flow for each of the five years.

b. Use residual operating income techniques to value this firm.

c. Attempt to value the firm using discounted cash flow analysis. Do you get the same answer as that for part (b) of the exercise?

Reference no: EM131491221

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