Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. you have just graduated and are working at a small

You have just graduated and are working at a small company. The CEO is thinking...

60.1K

Verified Solution

Question

Accounting

You have just graduated and are working at a small company. The CEO is thinking about going public and has asked you, the only member of the team with a business degree, to estimate the value of the equity by Monday. Thankfully, you remember that you learned how to do this in your FIN310 class! You have come up with the following inputs to get back to the CEO:

  1. 2021 free cash flow: $550,000
  2. 2022 free cash flow: $575,000
  3. 2023 free cash flow: $605,000
  4. Annual FCF growth after 2023: 3%
  5. 2020 EBIT: $850,000
  6. 2020 Depreciation: $150,000
  7. 2020 earnings: $410,000
  8. Company WACC (discount rate): 11%
  9. Total debt: $1MM

Please develop an equity valuation for the business using the free cash flow valuation method. Please also identify two additional equity valuation methods, and describe when each of those methods is best used to value a company's equity.

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students