Answer:
The present value of terminal value is $ 863,689.48 Â
Explanation:
Terminal value=Cash flows at third year*(1+g)/WACC-g
cash flows at the third year is $64,000
g is the growth rate of net cash flows which is 2% in perpetuity
WACC is 8%
Terminal value=$64,000*(1+2%)/(8%-2%)
            =$64000*1.02/0.06
            =$ 1,088,000.00 Â
The present value of terminal=terminal value*discount factor in year 3
discount factor in year=1/(1+8%)^3=0.793832241
Present value of terminal cash flow=1,088,000.00 *0.79383224
                              =$ 863,689.48 Â
Answer:
​$863​,​689.48
Explanation:
Terminal value means the value of an asset at future date.. The terminal value is the last value after the third year.. The formula goes thus
Terminal Value=( Last cash flow X 1 + Growth rate) / (Required return - growth return)
TV= [640000 X (1+2%) ] / [8% - 2 %]
TV= 64000 X 1.02 / 0.08-0.02
TV=65280 / 0.06
TV=$1,088,000
Terminal value is $1,088,000
To get the present value of Terminal value
Pv= Terminal value (1+i)^n
Pv= 1,088,000(1+0.08)^3
Pv= 1,088,000(1.08)^3
Pv=1,088,000(1.259712)
Pv=863​,​689.48
Therefore, the present value of the terminal value is $863​,​689.48
