Estimate the terminal value

Assignment Help Finance Basics
Reference no: EM132528302

You have been asked to review the terminal value calculation in a valuation done by another analyst. The analyst has the following estimates for net income and FCFE for the next 3 years:

1 2 3
Net income 220 286 371,8
FCFE 88 114,4 148,72

To estimate the terminal value, the analyst has taken the FCFE in year 3 and grown it by 12% (the stable growth rate) and used a cost of equity of 18%, without considering the changing reinvestment needs. If the firm's return on equity will remain unchanged at current levels in perpetuity and the analyst's estimates of the FCFE for the high growth period are correct, estimate the correct terminal value of equity, using the perpetual growth rate of 12% and the cost of equity of 18%.

Reference no: EM132528302

Questions Cloud

Repaid in fixed annual installments : On the same loan, is the total amount of interest payable more if the loan is repaid in fixed annual installments, by constant amortization or on maturity?
Manifestation of the coping mode of cognition : The difference between intelligence as the manifestation of the coping mode of cognition and understanding as manifestation of the pervasive optimization mode
How would the investments be ranked : How would the above investments be ranked (highest to lowest)? Yama Corporation is considering the three competing investment proposals
Estimate what is the internal rate of return : Yama Corporation recently purchased,The disposal value of the old machine at the time of replacement is zero. What is the internal rate of return?
Estimate the terminal value : You have been asked to review the terminal value calculation in a valuation done by another analyst. The analyst has the following estimates for net income
Reviewing the valuation of henden corp : You are reviewing the valuation of Henden Corp, a small industrial manufacturing company. The analyst has estimated a value of ?800 million for the company
Potential to adversely affect assets : A threat is an event which has the potential to adversely affect assets.
Compute what is the net present value of the investment : What is the net present value of the investment, assuming the required rate of return is 6%? Would the company want to purchase the new machine?
ENGR9881 Computer Networks Assignment : ENGR9881 Computer Networks Assignment Help and Solution, Flinders University - Assessment Writing Service - Demonstrate the design and implementation

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd