The ceo of buffalo bobs chicken wings is considering


The CEO of Buffalo Bob’s Chicken Wings is considering selling her firm. She estimates that the firm’s current year free cash flow is $4 million. She asks her CFO to create several estimates of the firm’s value. Scenario 1 is to be based on a 4% annual growth rate forever; the second scenario is to reflect a 6% annual growth rate for the next five years and 3% thereafter. The firm’s cost of capital for both scenarios is estimated to be 10%. What is the value of the firm under Scenario 1 and Scenario 2?

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