Question: Using the following set of parameters: Gross Margin: 40% Fixed costs $2,000 Revenue Growth Rate for Years 1 to 5: 10% FCF Steady Growth Rate

Using the following set of parameters:

Gross Margin: 40%

Fixed costs $2,000

Revenue Growth Rate for Years 1 to 5: 10%

FCF Steady Growth Rate after Year 5: 3%

Discount Rate: 12%

Year 1 Revenue: $5,000

Tax Rate 35%

Terminal Year: 5

Please answer the following questions;

  • 1.Whatpercentageofthetotalenterprisevalueisattributedtotheterminalvalue?
  • 2.Howsensitiveisyourvaluationtotheinputs?Ifeachinput(revenuegrowthrateforyears1-5,FCFSteadygrowthrate,ordiscountrate)changesby10%oftheiroriginalvalue,whichinputaffectsthetotalenterprisevaluethemost?Youwillhavetochangeeachinputseparately(3scenarios)toseewhichinputhasthegreatesteffect.

Please show all work

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