Use a 3 year planning period + EBITDA multiple to value a firm with the following characteristics.
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Question:
Use a 3 year planning period + EBITDA multiple to value a firm with the following characteristics.
Last period’s EBIT = $3,000,000 (this is an existing firm that had EBIT last period. You need this to forecast the future cash flows that start at t1)
Forecast growth in EBIT = 7.5% / Year
Tax Rate 35%
Depreciation (% EBIT) = 20%
CAPEX (% EBIT) = 1/6 =16.6666667%
WACC = 12%
EBITDA multiple = 8
There will be no change in working capital over the firm's remaining life.
What is the PV of the planning period? What is the terminal value at t3? What is the discounted terminal value? What is the present value of the firm?
Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
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