1. USING DCF TO COMPUTE ENTERPRISE VALUE AND BOOK VALUE

Using the information from APPLYING THE DISCOUNTED CASH FLOW METHOD OF BUSINESS VALUATION (Mergers, Acquisitions and Corporate Restructurings Patrick A Gaughan, page 569-570), answer the following question.

Year123456

FCFs

$27 500 000

$30 100 000

$32 800 000

$35 400 000

$37 900 000

$40 200 000

• WACC (r) = 15%
• Growth rate (g) = 7%
• Market Value of Debt & Preferred Equity = $100 000 000
• Shares Outstanding = 40 000 000

1. Calculate the capitalization rate (1)
2. Calculate the terminal value (2)
3. Calculate the Total Enterprise Value (TEV) (5)
4. Calculate the share price (2)