Estimate the terminal value of the firm in ten years

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You have been asked to review a terminal value calculation (projected for the end of year 10) of a technology company. The analyst has forecast the after-tax operating income in year 11 to be SEK 140 million, and estimated a growth rate of 3.8% in perpetuity. He has also assumed that net capital expenditures in year 11 will be SEK 41 million and that working capital will increase by SEK 5 million in that year. Finally, he is continuing to use the firm's current high cost of capital (which is 10.1%) in estimating terminal value.

Taking all of the analyst's assumptions about growth, reinvestment and cost of capital as given, estimate the terminal value of the firm in ten years?

Reference no: EM132668407

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