Question

Question 9 Dout of 2 points You expect Canyon Buff Corp to generate the following free cash flows over the next five years Year 1 2 FCF (5 millions) 75 84 % Beginning in year six you estimate that Canyon Buff's free cash flows will grow at 5% per year and that Canyon Buff's weighted average cost of capital is 15% (Hint use Excel to do the calculation) The enterprise value for Canyon Buff Corporation is million Instruction: Note the unit is million Type ONLY your numerical answer, NO S sign, and round to ONE decimal place Again, the unit is million Selected Answer None Given

Answer 1

Given,

Growth rate (g) = 5%

Weighted average cost of capital (wacc) = 15%

Solution :-

Terminal value FCE at years Lресс - 9 120 15% – 5% 120 10% = $1200 million

		year 1	year 2	year 3	year 4
FCF ($ million)		75	84	96	111
Terminal value					1200
Total		75	84	96	1311
PV factor@ 15%		0.86956522	0.75614367	0.65751623	0.57175325
Present value of FCF		65.217391	63.51606805	63.121558	749.5685

Enterprise Corporation Value of Value of Canyon Buff to equals to present FC Es calculated above. Enter poise Value = 65.217391 +63.51606805 + 63.12 1558 + 749.5685 z $ 941.4 million Note : Formula for PV factor a (+W ACC) where, WACC = weighted average Cost of Capital na No. of years

- For example, PV facts for Year 1 pv factor for Year 2 (It WACC) a (I+WACC) and so on.