Simar Sales Co. sells and installs kitchen appliances. Simar guarantees parts and labor for one year after installation. Simar w
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Answer:
Kedia Inc value:
$228.070.175,43
228.07 millions dollars
Explanation:
Next year Free Cash Flow: 10,000,000
Folllowing year: 25,000,000
from there, 4% increase
WACC = return = 14%
We use gordon model to know the present value of the future free cash flow growing at 4%:
FCF_0: 25,000,000
FCF_1: 25,000,000 x (1.04) = 26,000,000
future FCF: 260,000,000
This is calculated 2 years ahead, thus we need to discount this by 2 years to ge the value today.
We also need to discount the 10,000,000 million in one year and the 25,000,000 millions in two year:
<u><em>For this task we use the present value of a lump sum:</em></u>
Discounted future cash flow:
future dividends growing at 4%: 260,000,000.00
time 2.00
rate 0.14
PV 200,061,557.40
future dividends of 25,000,000
PV 19,236,688.21
future dividends of 10,000,000
PV 8,771,929.82
<u>Total value:</u> 200,061,557.4 + 19,236,688.21 + 8,771,929.82 = 228.070.175,43