The Datametrix Corporation has been in operation for one full

The Datametrix Corporation has been in operation for one full year (2010). Financial statements are shown below. Sales are expected to grow at a 30 percent annual rate for each of the next three years (2011, 2012, and 2013) before settling down to a long-run growth rate of 7 percent annually. The cost of goods sold is expected to vary with sales. Operating expenses are expected to grow at 75 percent of the sales growth rate (i.e., be semifixed) for the next three years before again growing at the same rate as sales beginning in 2014. Interest expense is expected to grow with sales. Depreciation can be forecasted either as a percentage of sales or as a percentage of net fixed assets (since net fixed assets are expected to grow at the same rate as sales growth). Individual asset accounts are expected to grow at the same rate as sales. Accounts payable and accrued liabilities are also expected to grow with sales.
Because Datametrix is in its startup stage, management and venture investors believe that 35 percent is an appropriate weighted average cost of capital (WACC) discount rate until the firm reaches its long-run or perpetuity growth rate. At that time, it will have survived, recapitalized its capital structure, and become a more typical firm in the industry with an estimated WACC of 18 percent. Calculate Datametrix€™s enterprise value as of the end of 2010. Also indicate what the equity would beworth.
The Datametrix Corporation has been in operation for one full
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
Perpetuity
Perpetuity refers to payments that are made without an end or maturity date. A perpetuity is classified as an annuity, which is something that earns a dividend or receives a payment at a regularly scheduled interval, generally yearly. So, how...

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