You have just graduated and are working at a small company. The CEO is thinking about going public and has asked you, the only member of the team with a business degree, to estimate the value of the equity by Monday. Thankfully, you remember that you learned how to do this in your FIN300 class! You have come up with the following inputs to get back to the CEO:

1. 2021 free cash flow: $55,000
2. 2022 free cash flow: $57,000
3. 2023 free cash flow: $60,500
4. Annual FCF growth after 2023: 3%
5. 2020 EBIT: $80,000
6. 2020 Depreciation: $13,000
7. 2020 earnings: $38,000
8. Company WACC (discount rate): 11%
9. Total debt: $120,000

Please develop an equity valuation for the business using the free cash flow valuation method.

Please also identify two additional equity valuation methods, and describe when each of those methods is best used to value a company's equity.

Answer rating: 100% (QA)

To estimate the equity value of the business using the Free Cash Flow FCF valuation method you can u... View the full answer