Anonymous
Anonymous asked in Business & FinanceInvesting · 7 years ago

Finance enterprise value calucation?

You expect ABC Corporation to generate the following free cash flows over the next 5 years:

Year 1 2 3 4 5

FCF (€millions) 25 28 32 37 40

Following year five, you estimate that ANS free cash flows will grow at 5% p.a. and that ANC’s

WACC is 13%. The enterprise value of ANC corporation is closest to:

a. €396 million

b. €290 million

c. €382 million

d. €350 million

2 Answers

Relevance
  • 7 years ago
    Favorite Answer

    PV(FCFs) 25/(1.13)^1+28/(1.13)^2+32/(1.13)^3.....= 111

    Terminal Value (40*1.05)/(.13-.05)= 525

    PV(TV)= 525/(1.13)^5 = 285

    111+285=396 "A"

  • 7 years ago

    Terminal value at "t" = 5: 40m(1.05) / (0.13 - 0.05) = 545m

    so CF5 = 40 + 545 = 565

    use DCF, and discount at 13% = 395.58m, answer is "a"

    CF = cash flow

    DCF = discounted cash flow

Still have questions? Get your answers by asking now.