As a going-concern, UniTex will generate free cash flow of $9 million next year (time t=1). The expected perpetual cash flow growth rate is 0%, based upon a 50% probability of 5% growth and a 50% probability of -5% growth. WACC is 10%. What valuation would you go with if you were estimating Enterprise Value for the senior part of the capital structure? What valuation would you go with if you were estimating Enterprise Value for the junior part of the capital structure? Explain your answer. What is the technically correct answer?

Answer rating: 100% (QA)

When estimating the enterprise value for the senior part of the capital structure we would use the f... View the full answer