Present value investments assumption

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Reference no: EM13971320

Using the zero net present value investments assumption for the perpetuity period, calculate the value of the perpetuity (terminal value) under the residual income model under the following assumptions.

In thousands, except %
Residual income in first year of perpetuity period	$ 10,000
Sustainable growth rate in NOPAT	2%
Weighted-average cost of capital	10%
Book value of core operations at beginning of first year of perpetuity period	$ 205,000
Book value of core operations at end of first year of perpetuity period	$ 217,000
Number of years in forecast horizon	7 years

Reference no: EM13971320

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