v Consider the following forecasts for 2015-2019 of the Future Cash Flows, EBITD
ID: 2647999 • Letter: V
Question
v
Consider the following forecasts for 2015-2019 of the Future Cash Flows, EBITDA and Future Interest Tax Shield for Firm X if the expansion were not to occur. Assume that the EBITDA Multiple is 5.0.
Assume a discount factor of 10% for the Free Cash Flows and the Continuation Value, and 7% for the Interest Tax Shield.
Firm Value
2015
2016
2017
2018
2019
Free Cash Flow of Firm
3,638
6,862
7,116
7,373
7,629
EBITDA
20,044
Interest Tax Shield
28
28
28
28
28
What is the Present Value (at December 2014) of the Continuation Value forecast of Firm X if the firm where not to do the expansion?
a)62,228
b)72,228
c)82,228
d)92,228
Firm Value
2015
2016
2017
2018
2019
Free Cash Flow of Firm
3,638
6,862
7,116
7,373
7,629
EBITDA
20,044
Interest Tax Shield
28
28
28
28
28
Explanation / Answer
my answer is
72,228
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