Starting a commercial real estate division

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Bay Properties is considering starting a commercial real estate division.

It has prepared the following? four-year forecast of free cash flows for this? division:

Year 1 -101,000

Year 2 12,000

Year 3 86,000

Year 4 230,000

Free cash flow

Assume cash flows after year 4 will grow at 4% per? year, forever. If the cost of capital for this division is 13%?, what is the continuation value in year 4 for cash flows after year? 4? What is the value today of this? division?

Reference no: EM133119299

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