Exhibit 10.13 presents free cash flow and economic profit forecasts for ApparelCo, a $250 million company that produces men's clothing.
ApparelCo is expected to grow revenues, operating profits, and free cash flow at 6 percent per year indefinitely. The company earns a return on new capital of 15 percent. The company's cost of capital is 10 percent. Using the key value driver formula, what is the continuing value as of year 5? Using discounted cash flow, what is the value of operations for ApparelCo? What percentage of ApparelCo's total value is attributable to the continuing value?

  • CreatedAugust 12, 2015
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