Question #55

Reading: Reading 21 Free Cash Flow Valuation

PDF File: Reading 21 Free Cash Flow Valuation.pdf

Page: 28

Status: Unattempted

Part of Context Group: Q55-57 First in Group
Shared Context
- Assuming a CFO figure of £75,000 and capital expenditure of £20,000, Fishy Discs free cash flow to the firm for 20x9 is closest to? A) £55,600. B) £65,000. C) £75,600.
Question
Using only the corporate finance firm's data in Exhibit 2 and their growth assumptions, the value of Fishy Discs Ltd.'s equity is closest to?
Answer Choices:
A. £2,033,000
B. £3,075,000
C. £3,105,000
Explanation
Using the 3 stage DCF model: CF1 = £84,000 CF2 = £94,080 CF3 = £105,370 CF4 = £118,014 + £708,084 + £3,068,364 I = 8 CPT →NPV = £3,104,628 Firm value = £3,104,628 Equity value = firm value – debt value £3,074,628 = £3,104,628 – £30,000
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