Question: Terminal Value = CF T / (r - g) Present Value of Cash Flow = CF T / (1+r) T Future Value of Cash Flow
Terminal Value = CFT / (r - g)
Present Value of Cash Flow = CFT / (1+r)T
Future Value of Cash Flow at T = CF0 x (1+r)T
Terminal value at T-1 = CFT / (r-g)
Last digit of your student ID number (if you dont know your student ID number, please use the last digit of your birthday).: _5__
Format A: If your student number (birthdate) ends with 1/2/3
Format B: If your student number (birthdate) ends with 4/5/6/7
Format C: If your student number (birthdate) ends with 8/9/0
NewCo expects the following free cash flows for the next three years. NewCos cash flow expects to grow at a steady rate of 5% for the foreseeable future after Year 3.
| Format | Disc rate |
| Year 0 | Year 1 | Year 2 | Year 3 |
| A | 15% | Free cash flow | -$400,000 | $0 | $200,000 | $300,000 |
| B | 20% | Free cash flow | -$500,000 | $0 | $300,000 | $400,000 |
| C | 25% | Free cash flow | -$600,000 | $0 | $400,000 | $500,000 |
a) Using the DCF analysis, calculate the value of NewCo assuming the appropriate discount rate for the next three years and 10% afterwards. (1.5 points)
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