Terminal value refers to the valuation attached to the end of the planning perio

Question

Terminal value refers to the valuation attached to the end of the planning period; it captures the value of all subsequent cash flows. Estimate the value today for each of the following sets of future cash flow forecasts. Claymore Mining Company anticipates that it will earn firm FCFs of $4 million per year for each of the next five years. Beginning in year 6, the firm will earn FCF of $5 million per year for the indefinite future. If Claymore’s cost of capital is 10%, what is the value of the firm’s future cash flows? Please show formulas so I can re-create in Excel. Thanks!!!

a. Claymore Mining Company Given Unlevered Cost of Capital 10.00% Year 1 2 3 4 5 6+ FCF $ 4,000,000.00 $ 4,000,000.00 $ 4,000,000.00 $     4,000,000.00 $ 4,000,000.00 $ 5,000,000.00 Solution Present value of free cash flows: Planning period Terminal value Enterprise Value

Explanation / Answer

Enterprise Value = $4,62,09,213

Year 1 2 3 4 5 5 FCF 4000000 4000000 4000000 4000000 4000000 50000000 PVF (10%) 0.909091 0.826446 0.751315 0.683013 0.620921 0.620921 PV of FCF 3636364 3305785 3005259 2732054 2483685 31046066 46209213

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.