Consider the following forecasts for 2015-2019 of the Future Cash Flows, EBITDA
ID: 2647998 • Letter: C
Question
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
If the Value of Firm X (at December 2014) of doing the expansion is estimated to be $97,706, should Firm X do the expansion (according to the NPV of the expansion)?
a)Yes
b)No
c)Maybe
d)None of the Above
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
Maybe
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