You are valuing your business ready for its initial public offering. You have determined the most recent annual (2021) cash-flow to the firm, was $30 million. You expect that these cash-flows will increase at an 10% annual rate (g1) over the next two years. At the end of two years (the end of 2023), the cash-flow growth rate will drop to 5% per year (g2) in perpetuity. The firm’s WACC is 15%. Calculate the expected value of your firm.

You are valuing your business ready for its initial public offering. You have determined the most recent annual (2021) cash-flow to the firm, was $30 million. You expect that these cash-flows will increase at an 10% annual rate (g1) over the next two years. At the end of two years (the end of 2023), the cash-flow growth rate will drop to 5% per year (g2) in perpetuity. The firm’s WACC is 15%. Calculate the expected value of your firm.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter9: Corporate Valuation And Financial Planning

Section: Chapter Questions

Problem 2MC

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