Calculate terminal value using growing perpetuity method

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Assignment

Using the spreadsheet template provided, calculate the value of Generic Research under the growth strategy.

Assumptions:

• In addition to the growth rate, they will spend an extra $5M on advertising in 2013, 2014 and 2015.
• The planning period growth rate is 8%, the terminal growth rate is 3%, and WACC is 8.8%.
• The interest rate on new debt is 6.5%.
• Revenues and expenses grow at the same rate.

This contains the pro forma balance sheet, which has already been completed for you, and the post-acquisition 2009 numbers for the income statement. The groundwork has been laid, and you can start putting in your growth rates, calculating the pro forma income statement and the free cash flows. You can use a planning period of five years and use the sixth year for the terminal value calculation. Calculate terminal value using the growing perpetuity method.

Reference no: EM131522397

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