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September 20, 2014

September 20, 2014

Posted by **Yinka** on Thursday, November 15, 2012 at 10:19am.

- STOCKS & BONDS -
**NAINIAVI@GMAIL**, Saturday, November 17, 2012 at 6:57amGrowth rate after 4 years = 7%

Cash flow for year 5 = $15,000,000*1.07 = $16,050,000

WACC = 12%

Value of free cash flows after year 4 at the end of 4 = $16,050,000 / (0.12-0.07)

= $16,050,000 / 0.05

= $321,000,000

Free cash flow for year 4 = $15,000,000+321,000,000 = $336,000,000

Year 1 2 3 4

Total free cash flow $3,000,000 $6,000,000 $10,000,000 $336,000,000

PVIF12% 0.8929 0.7972 0.7118 0.6355

PV of free cash flow $2,678,571 $4,783,163 $7,117,802 $213,534,074

PV $228,113,612

Enterprise value = Market capitalization - Cash and equivalents + Debt + Preferred stock

= $228,113,612 + 60,000,000 = $288,113,612

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