Question

20,21

20. Ryngaert Inc. fore thereafter. Rynge che company horizon value if the c here, whe yngaert Inc. forecasts growth of 1096 for the next five years and 5% eafter. Ryngaert's free cash flow last year was $5 million, what is its r value Ir the company's cost of capital is 25%? Assume the horizon erined at the end oy year 5, and, here, when applying the present value of constant growth arowing annuity formula, free cash flow at the end of year 6 (FCF) is used. a. $33.82 million. b. $42.28 million. c. $44.29 million d. $35.43 million. Please Show Your Calculation Steps Below 21. Continued from the above, what is the value of Ryngaert Inc.? a. $36.39 million b. $59.59 million C. $31.17 million dol l d. $28.40 million Please Show Your Calculation Steps Below

Answer 1

growth ()-5 year) = 10 % Cost of capital = 25% Perpetual growth = 5 % fc fo = 5 fcf = 5 x 110 = 5.5 fcfy = 5.5 X 110 = 6005 1060 = 6.66 fc fa= 6005 X Fofa = 6066 X 1-10 = 7.32 fe fs = 7-32 x 1-10= 8005 fcfo = 8005 Xpos = 8.46 Horizon Value = FCFO Cost of - Perpetual capital growth - 8.46 25 -005 = $ 42.28 milion. loption B Value fcf5 + + + + Horizon Value 1.255 + fcf2 fcf3 1:25 fcfy 7- 254 3 1.255 fch 1.25 1-252 42.28 10255 7.32 to. + 6.66 + 1.255 6005 & 1.254 5.5 1-25 1-252 1.25 = = 4.40 + 3.07 + 3.41 + 3 + 2.64 + 13.05 $31.17 million coption ()