Construct a DCF analysis and determine the Enterprise Value using the information outlined below. Forecast out five
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Question:
- Construct a DCF analysis and determine the Enterprise Value using the information outlined below. Forecast out five years of projections before using the Gordon Growth method to calculate Terminal Value. 28 points
- Revenues
- Current Year: $ 95,000
- Projected Year 1: $100,000
- Projected Year 2: $105,000
- Projected Year 3: $110,000
- Projected Year 4: $115,000
- Projected Year 5: $120,000
- Long-term industry growth rate of 3%
- Gross Margins forecasted at 38%
- Depreciation at 8% of Revenues
- Capital Expenditures of 9% of Revenues
- Operating Margins forecasted at 16%
- Tax Rate of 25%
- DSO, DIO, and DPO of 30, 60, and 30 days respectively
- Prepaids running 2% of revenues and Accruals running 3% of revenues
- Target Capital Structure of 35% Debt and 65% Equity
- Company pays 5% for its debt
- Risk free rate of 2%, levered beta of 1.2 and market risk premium of 6%
- Use a 360-day year
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