12.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||Year 2||Year 3||Year 4|
|Free cash flow||$-122,000||$-9,000||$100,000||$219,000|
Assume cash flows after year 4 will grow at 3% per year, forever. If the cost of capital for this division is 17%, what is the value today of this division?
The value today is $528,283.
The value today is $928,283.
The value today is $228,283.
The value today is $728,283.