Assume a venture has a perpetuity enterprise value cash flow of $800,000. Cash flows are expected to

Question:

Assume a venture has a enterprise value cash flow of $800,000. Cash flows are expected to continue to grow at 8 percent annually and the venture’s WACC is 15 percent.
A. Calculate the venture’s enterprise value.
B. If the venture has $2 million in interest-bearing debt obligations, what would be the venture’s equity value?
C. Show how your answers to Parts A and B would change if the cash flow growth rate was only 6 percent and the WACC was 16 percent.

Perpetuity
Perpetuity refers to payments that are made without an end or maturity date. A perpetuity is classified as an annuity, which is something that earns a dividend or receives a payment at a regularly scheduled interval, generally yearly. So, how...