If you expect the target firm to grow at your calculated annual growth rate for the next four years (2021- 2024) and then beyond
1 answer:
Answer:
The question is incomplete, so I looked for a similar one:
FCF 2018 = ($4,923,478 - $1,033,930 + $605,752) - ($2,173,000 + $605,752) - ($8,501,348 - $7,600,543) = $4,495,300 - $2,778,752 - $900,805 = $815,743
FCF 2019 = ($5,960,124 - $1,251,626 + $1,239,239) - ($2,580,000 + $1,239,239) - ($7,210,800 - $5,905,791) = $5,947,737 - $3,819,239 - $1,305,009 = $823,849
FCF 2020 = ($5,998,321 - $1,259,647 + $239,895) - ($1,903,500 + $239,895) - ($5,975,324 - $4,116,364) = $4,978,569 - $2,143,395 - $1,858,960= $976,214
average annual growth rate 2018 - 2020 = {[(823,849 - 815,743)/815,743] + [(976,214 - 823,849)/823,849]} / 2 = (0.99% + 18.49%) / 2 = 9.74%
FCF 2021 = $976,214 x 1.0974 = $1,071,297
FCF 2022 = $1,071,297 x 1.0974 = $1,175,642
FCF 2023 = $1,175,642 x 1.02 = $1,199,154
first we must calculate the terminal value in 2022 = $1,199,154 / (10.5% - 2%) = $14,107,699
the firm's current value = $1,071,297/1.105 + $1,175,642/1.105² + $14,107,699/1.105² = $13,486,312
You might be interested in