What is the fair market value of the project

Reference no: EM132175218

Question - Suppose the software development project grows at a steady growth rate of 2% after year 5. Assume SG&A is 10% of revenue in each year. Assume Initial Investment is depreciated straight line over 6 years, no salvage value at the end of the 6th year. In order to calculate the working capital in year 6, you may calculate the revenue in year 7, and assume working capital in year 6 is 10% of the revenue in year 7.

1) What is the free cash flow in year 6?

2) What is the present value of the growing perpetuity, i.e., the terminal value?

3) What is the fair market value of the project?

Reference no: EM132175218

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