Question

Go Corp. expects free cash flows of $1,000,000, $1,100,000, $1,200,000, $1,300,000, $1,400,000, in years 1,2 3,4, 5 respectively. In addition, Go has a continuing value of $2,500,000 at the end of year 5 and a cost of capital of 9%. Assuming year end cash flows, please open an excel spreadsheet enter the numbers above (in year 5 – you will have to sum the cash flow and the continuing value). Then use the NPV function to bring these yearly cash flow totals to present using the weighted average cost of capital as the discount rate. The enterprise value for Go Corp is _______________.

Answer 1

Year	free cash flow
1	1000000
2	1100000
3	1200000
4	1300000
5	3900000
present value of free cash flow = Using NPV function in M S Excel	NPV(9%,E1357,E1358,E1359,E1360,E1361)	6225584.542
year 5 cash flow	1400000+2500000	3900000