Question: 6. Estimate enterprise value. In the final step, discount free cash flow and continuing value using the weighted average cost of capital estimated in Assignment
6. Estimate enterprise value. In the final step, discount free cash flow and continuing value using the weighted average cost of capital estimated in Assignment IV. To estimate continuing value, apply the key value driver formula using final-year NOPLAT, final-year ROIC without acquired intangibles, WACC computed from Assignment IV, and long-run growth of 2 percent (as projected by the analyst community). Summing discounted cash flow and discounted continuing value generates the value of operations. To this value, add the market value (as proxied by book value) of nonoperating assets (listed in the reconciliation of total funds invested) to estimate enterprise value. From enterprise value, deduct debt, debt equivalents (pensions and other long-term provisions), and hybrid securities (minority interest). This will generate an estimate of intrinsic equity value.
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