how to calculate enterprise value if we have free cash flow and will remain constant forever...
how to calculate enterprise value if we have free cash flow and will remain constant forever and WACC
Homework Answers
When free cash flow will remain constant forever then it is in the form of a perpetuity. The value of a perpetuity = constant annual amount/discount rate. Here the free cash flow amount is the constant annual amount and WACC is the discount rate.
Supposing that the company has no debt then enterprise value = Amount of constant free cash flow/WACC. For instance if the amount of free cash flow per year is $10,000 and WACC is 8% then enterprise value = $10,000/8% = $125,000
If the company has debt then use the free cash flow figure to calculate the unlevered free cash flow. It is also known as the free cash flow to the firm. Suppose that a company has an amount of unlevered free cash flow of $15,000 and this amount will remain constant in future. Its WACC is 9%. So its enterprise value = 15000/9% = $166,666.67
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how to calculate enterprise value if we have free cash flow and
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Extensive Enterprise Inc. is expected to generate a free cash flow (FCF) of $11,610.00 million this...
Extensive Enterprise Inc. is expected to generate a free cash flow (FCF) of $11,610.00 million this year (FCF $11,610.00 million), and the FCF is expected to grow at a rate of 26.20 % over the following two years (FCFa and FCF3). After the third year, however, the FCF is expected to grow at a constant rate of 4.26 % per year, which will last forever (FCFa). Assume the firm has no nonoperating assets. If Extensive Enterprise Inc.'s weighted average cost...
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A company's current year free cash flow is $250,000. Cash flows are expected to stay steady...
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QUESTION 20 Under the free cash flow approach to valuation: o share value equals the present...
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Extensive Enterprise Inc. is expected to generate a free cash flow (FCF) of $11,610.00 million this year (FCF $11,610.00 million), and the FCF is expected to grow at a rate of 26.20 % over the following two years (FCFa and FCF3). After the third year, however, the FCF is expected to grow at a constant rate of 4.26 % per year, which will last forever (FCFa). Assume the firm has no nonoperating assets. If Extensive Enterprise Inc.'s weighted average cost...
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