Sunday

November 23, 2014

November 23, 2014

Posted by **Gregg** on Saturday, March 14, 2009 at 7:20pm.

Gregg just received an offer for his company from a private equity firm. He is tempted to take the offer but he wants to understand how the offer price was determined. In particular, he is trying to estimate the long-term constant growth rate in free cash flow. Assume that the required return is 16%. If Gregg was just offered $50 million for his business, determine the constant growth rate in free cash flow after three years that would justify this offer price.

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