December 2010 Q1

This topic contains 0 replies, has 1 voice, and was last updated by avatar htung00 1 year, 4 months ago. This post has been viewed 29 times

Viewing 1 post (of 1 total)
  • Author

  • avatar
    • Topics: 6
    • Replies: 4

    For proposal 3: buy out

    Tthe value of the company was calculated as follows in the suggested answer:

    Estimated value based on cash flows to perpetuity = 28·4/(0·11 – 0·05) = $473·3m

    The forumla looks like the normal growth model formula except the numerator isn’t being multiplied by (1+g) the growth in the question was only applicable to profits before depreciation and not to the cash flow.

    How did the come to this forumal from the normal growth model?

Viewing 1 post (of 1 total)

You must be logged in to reply to this topic.