Question: You are using DCF to value a firm. next year you predict free cash flows of 1 million dollars. the second-year free cash flows are

You are using DCF to value a firm. next year you predict free cash flows of 1 million dollars. the second-year free cash flows are estimated at 1.3 million. the next year after that you feel free to cash flows will grow forever at 3%. if you have a discount rate of 3%, what is the value of this firm?

Step by Step Solution

★★★★★

3.28 Rating (157 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Discounted Cash Flow Cash Flow 1rn all cash flows valu... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

The table below shows the projected free cash flows of an acquisition target. The potential acquirer wants to estimate its maximum acquisition price at an 8 percent discount rate and a terminal value...

A firm has projected free cash flows of $575,000 for Year 1, $625,000 for Year 2, and 750,000 for Year 3. The projected terminal value at the end of Year 3 is $8,000,000. The firm's Weighted Average...

you are using DCF to value a firm. Next year you predict free cash flows of $1 million. The second year free cash flows are estimated at $1.3 million. The next year after you feel free cash flows...

Please use the provided template to solve the problem and please show work / formula of working cell. Please use the provided template to solve the problem and please show work / formula of working...

Stocks and Their Valuation: The Corporate Valuation Model The recognition that dividends are dependent on earnings, so a reliable dividend forecast is based on an underlying forecast of the firm's...

Labs Inc. has an equity beta of 2 under capital structure (D/E) = 1. The current cost of debt for the firm is 7.5%. The projected firm's unlevered free cash flows in 2018 and 2019 are $111 million...

F1 Q16-Q18 Please show all workings/give explanations Note: Questions 11 20 are based on the same mega problem. For convenience we have included the entire set of information in every question. For...

FIRE 623 Graded Case Assignment - Mid-Atlantic Container Corporation 100 points Due December 4, 2019 at 7:00 pm 1) Assess the current financial health and recent financial performance of the company....

Use a 30 percent illiquidity discount when estimating exit value for a private company using public company comparable multiples. What was the post-money valuation of Outreach Networks in 2011?...

An African swallow carrying a very small coconut is flying horizontally with a speed of 18 m/s. (a) If it drops the coconut from a height of 100 m above the Earth, how long will it take before the...

What are the different ways of starting Python ?

Concerning AAR: 1. Describe how the average accounting return is usually calculated and describe the information this measure provides about a sequence of cash flows. What is the AAR criterion...

The enrollment data (figures in thousands) for a state college for the past six years are shown. Develop the equation for the linear trend component for this time series. Comment on what is happening...

The audit committee of DHB Industries was criticized for failing to carry out its oversight responsibilities. What are the primary responsibilities of a public companys audit committee?

Does the SEC have a responsibility to protect the investing public from self-interested corporate executives? Do professional auditing standards or other rules or regulations impose such a...

David Brooks apparently made threatening remarks to certain of his companys independent auditors. What actions should auditors take when they are the target of hostile statements or actions by client...

What potential consequences do frequent changes in auditors have for the quality of a given entitys independent audits? Identify professional standards or other rules and regulations that are...

What is the definition of "marketing" and what is the definition of "hospitality and tourism marketing"? Comparing to traditional manufacturing industries, what are the characteristics and challenges...

1. Refer to file Chapter9.xls, tab Scenario. Under Scenario 1, what revenue growth would make the NPV equal to 0? 2. Opex Capital is a small investment advisory ?rm located in Portland, Oregon, that...

1. What are the advantages and disadvantages of Rosetta Stone going public? 2. What do you think the current value of a share of Rosetta Stone is (at the time of the case)? Justify your valuation on...

Using the information provided by the case, particularly in the Spotifys section Valuation, will carry out a valuation of the company and its shares using the method Discounted Cash Flow (DFC). They...

Please read the following, and show all computations the verify your reason/answer. Thanks so much!! Real Option Homework Thriller Land is an old fashioned amusement park based in Neverland,...

Please Do Questions E-L! A) 1) The sources of capital which should be included in Coleman's WACC are noncallable bond, preferred stock and common stock. 2) The components cost should be figured on...

2. Below are the income statements and balance sheets of Apple Inc ending fiscal year 2020. You are tasked to determine whether the company's stock price is overvalued or undervalued by conducting a...