1) when determining enterprise value using the last album historically year and

Question

1) when determining enterprise value using the last album historically year and anticipating growth rate and benefits of 3%, you would:

a) discount net income by the weighted average cost of capital

b) capitalize net income and the cost of equity

c) assume free cash flow will go up 3%

d) add growth rate

2) discounted cash flow valuation method is most closely associated with which of the following valuation approaches:

a) cost

b) Market

c) enterprise

d) income

3) Assuming free cash flow for 2018 2019, 181 and 194 respectively, cost of equity is 22 weighted average cost of capital is 14, expected growth year 4%, Present value of year 2014 and terminal rate would be?

Explanation / Answer

3) Present value(@ year 2014) of 2018 cash flow = 181 /1.14^4

+ PV of 2019 cash flow    = 194 /1.14^5

         =    107.17+ 100.76 =207.93

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