Four problems, one on each Excel tab. Thanks!

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Four problems, one on each Excel tab. Thanks!
Answered Same DayJul 09, 2021

Answer To: Four problems, one on each Excel tab. Thanks!

Shakeel answered on Jul 11 2021
147 Votes
Question 1
    Question 1
    Underline Electronics had a free cash flow for FY 2018 of $2,150 (all amounts are in $000). Ra
nd McDandy, CEO, projected a free cash flow growth of 3% per year for the next 5 fiscal years (FY2019 - FY2023). Beginning at the end of FY2023, free cash flow was expected to slow grow at only .5% in perpetuity.  McDandy expected Underline Electronics cost of capital to remain constant at 6.12% until the end of FY2023.  He also projected that beginning  in FY2024  the cost of capital will lower 4.25% and remain at 4.25%  in perpetuity. Considering this forecast he asked his CFO (you) to determine the fair market value (NPV) of the company.
    For this question consider FY2019 as Year 1 and FY2023 as Year 5. HINT: Note that the Cost of Capital is consistent for the years leading up to and including FY2023. The cost of capital then changes at the point that the Terminal Value is calculated. 
        Initial cash flow ($000) at t = 0            2150
        Growth rate for next five years            3%
        Growth rate afterwards in perpetuity            0.50%
        Cost of capital for next 5 years            6.12%
        Cost of capital afterwards in perpetuity            4.25%
        Year    Cash flow ($000)    PV    Terminal Value    Total...
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