Question

You are trying to calculate the enterprise value of DCB Corp using a free cash flow model. To that end you have put together some forecast for year 1 in the table below. Assume that free cash flows will grow at 1.5% in perpetuity and that the weighted average cost of capital of the firm (WACC) is 8%. Using this information, calculate the enterprise value of the firm. Express your answer in $-millions and round to two decimals (do not include the $-sign in your answer).

Sales | 142 |

Cost of sales | 51 |

Selling, general and administrative expenses | 6 |

Depreciation | 25 |

Increase in Net Working Capital | 5 |

Capital expenditures | 36 |

Marginal corporate tax rate | 20% |

Answer #1

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the Enterprise Value of a firm (using the DCF valuation
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& Capital Flows available to the firm by the Weighted Average
Cost of Capital (WACC). True or False

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million), and the FCF is expected to grow at a rate of 26.20% over
the following two years (FCF2FCF2 and FCF3FCF3). After the third
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Extensive Enterprise Inc. is expected to generate a free cash
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the following two years (FCF₂ and FCF₃). After the third year,
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nonoperating assets. If Extensive Enterprise Inc.’s weighted
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Please calculate the price per share using the free cash flow
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You are analyzing Ola Enterprises, a small manufacturing firm.
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$700,000 in debt. Additionally, the company has 100,000 outstanding
shares of common stock. There annual free cash flows are...

Praxis Corp. is expected to generate a free cash flow (FCF) of
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FCF is expected to grow at a rate of 20.20% over the following two
years ( FCF2 and FCF3 ). After the third year, however, the FCF is
expected to grow at a constant rate of 2.46% per year, which will
last forever ( FCF4 ). If Praxis Corp.’s weighted average cost of
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Go
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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
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Free cash flow forecasts for the next four years are $50,000,
$90,000, $70,000, and $100,000. There is a terminal value of
$800,000. If the weighted average cost of capital is 12% then what
is the value of the firm using the absolute valuation method if the
terminal value of the firm (at the end of four years from today) is
estimated to

The following is a five year forecast for the company
Free Cash Flow (in millions)
2010: -10
2011: 5
2012: 20
2013: 40
2014: 60
After 2014, earnings before interest and tax will remain
constant at $69 million, depreciation will equal capital
expenditures each year, and working capital will increase by $2
million. The company's WACC is 12.9% and its tax rate is 12%.
Estimate the market value of the company at the end of 2009.
Please show work

A company forecasts its free cash flows (in millions) as shown
below. If the company’s weighted average cost of capital is 10% and
the free cash flows are expected to grow at a rate of 3% after Year
2, what is the company’s total corporate value, in millions?
Year
1
2
Free cash flow
-$50
$100

Given free cash flow forecasts for the next four years are
$50,000, $90,000, $70,000, and $100,000 and there is a terminal
value of $800,000.
If the weighted average cost of capital is 12%, what is the
value of the firm, using the absolute valuation method if the
terminal value of the firm (at the end of four years from today) is
estimated to be ____
A.) $698,234
B.) $758,172
C.) $738,181

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