Question: Use a 3 year planning period + EBITDA multiple to value a firm with the following characteristics. Last periods EBIT = $3,000,000 (this is an

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?

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