Question

9. Sunshine Lodging Inc. (SLI) is a Florida-based hotel resort with the following projected unlevered free cash flows (UFCFs) for the next 5 years, given in USD million: Year1: 12.0 ; Year2: 13.8 ; Year3: 14.9 ; Year4: 16.5 ; Year 5: 18.0. After year 5, UFCFs are projected to grow at an annual rate of 5%. The company’s weighted average cost of capital stands at 8% per annum. Estimate the enterprise value of SLI based on the DCF methodology.

a)      USD 468 million

b)      USD 472 million

c)      USD 488 million

d)      USD 493 million

unanswered

Answer 1

Rate Calculation of Enterprise Value of SLI Based on Discaunated Cash flow Method Ginen Weighted Average Cost of Capital = 8% (Discount) Graueth Rate - 5% ofter years so ist we Calculate Value at the end of year 5 (Using Croweth made ) year & Cash floue & $ 18 Million year 6 Cashface - year 5 x (1 + Graneth Rate) Cashflare = 18 x 61.05) - 18.9 Millias

Value at year 5 = - Year 6 Cash-Flow Weighted Average - Graueth Cost of Capital Rate million $ 18.9 •08-05 $ 630 Million se. Value of all future Cashflow's be $630 Million at year 5

Doll Now, Calculating enterprise lv - Cashflows fear 7 1 1 + Discount Rate) Cashflame Present Value @ 8%. (in Million $) Year 12 le 11.83 ((1+.08)') (138) 2 13.8 14.9 16.5 18 .0 630.0 11.83 12 .13 12.25 429.85 (108)") (14.03)2 (04:0815) latal Pv of Cashflows = 488 Million so Enterprise Value of SL is 6 488 Million Option c) USD 488 Million is Correct