The table below shows the projected free cash flows of an acquisition target. Estimate the maximum acquisition price (MAP) as of the end o 2021, using a 9% discount rate and a terminal value (2025 is the beginning of terminal period with a 3% perpetual growth rate): 2021(Year 0) YEAR 2024 2025 FREE CASH FLOW ($ thousands) -$253 $119 $147 $187 The Present Value of $1 Table tells us: Period (n) 1 2 3 4 .917 Present Value Factor at 9% Discount Rate .842 772 2022 2023 .708 $97
The table below shows the projected free cash flows of an acquisition target. Estimate the maximum acquisition price (MAP) as of the end o 2021, using a 9% discount rate and a terminal value (2025 is the beginning of terminal period with a 3% perpetual growth rate): 2021(Year 0) YEAR 2024 2025 FREE CASH FLOW ($ thousands) -$253 $119 $147 $187 The Present Value of $1 Table tells us: Period (n) 1 2 3 4 .917 Present Value Factor at 9% Discount Rate .842 772 2022 2023 .708 $97
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:The table below shows the projected free cash flows of an acquisition
target. Estimate the maximum acquisition price (MAP) as of the end of
2021, using a 9% discount rate and a terminal value (2025 is the
beginning of terminal period with a 3% perpetual growth rate):
2021(Year 0)
YEAR
2024 2025
FREE CASH FLOW ($ thousands) -$253
$119 $147 $187
The Present Value of $1 Table tells us:
Period (n)
1
2
3
4
O $1,100,190.
$5,225,322.
O $2,454,821.
O $3,720,119.
.917
Present Value Factor at 9% Discount Rate
.842
772
2022 2023
. 708
$97
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