Problem:
Sunshine Resorts, Inc. is a fast growing hotel chain whose free cash flow (FCF) in the year just ended was $225 (in millions of dollars). Analysts expect the company's FCF to grow by 40% this year, by 25% in Year 2, by 15% in Year 3, and at a constant rate of 5% in Year 4 and thereafter. Sunshine Resorts' weighted average cost of capital is 13.00%.
Required:
Question 1: What is the best estimate of the value of Sunshine's operations at Year 0 in millions of dollars? Explain comprehensively and show all calculation.