ecall the Value of the Firm0 = Ʃ FCFt / [1 + WACC]t with t from 1 to ∞. The owners of Martial Arts Inc. [the owner/operator of a chain of karate dojos] are considering selling their business to a private equity firm. Next year’s end-of-year free cash flow (FCF1) is expected to be $1.25 million, lower than recent years due to a major expansion. Free Cash Flow is expected to grow at the rates shown in the table below thereafter. Beginning in year 7 a constant growth rate of 4% is forecast. The company's WACC is 6.50%. What is the estimated intrinsic value of the firm in millions of dollars? Round to two decimals. Year 0 1 2 3 4 5 6 7 Growth Rates 20.00% 15.00% 10.00% 8.00% 6.00% 4.00% $54.57
ecall the Value of the Firm0 = Ʃ FCFt / [1 + WACC]t with t from 1 to ∞. The owners of Martial Arts Inc. [the owner/operator of a chain of karate dojos] are considering selling their business to a private equity firm. Next year’s end-of-year free cash flow (FCF1) is expected to be $1.25 million, lower than recent years due to a major expansion. Free Cash Flow is expected to grow at the rates shown in the table below thereafter. Beginning in year 7 a constant growth rate of 4% is forecast. The company's WACC is 6.50%. What is the estimated intrinsic value of the firm in millions of dollars? Round to two decimals. Year 0 1 2 3 4 5 6 7 Growth Rates 20.00% 15.00% 10.00% 8.00% 6.00% 4.00% $54.57
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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4 - Recall the Value of the Firm0 = Ʃ FCFt / [1 + WACC]t with t from 1 to ∞. The owners of Martial Arts Inc. [the owner/operator of a chain of karate dojos] are considering selling their business to a private equity firm. Next year’s end-of-year
|
Year |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
|
Growth Rates |
20.00% |
15.00% |
10.00% |
8.00% |
6.00% |
4.00% |
- $54.57
- $68.15
- $70.31
- $83.63
- $98.28
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