(5) Calculate the Terminal Value To calculate the Terminal Multiple (as detailed above), we first apply the Perpetuity Growth Method using the Weighted Average Cost of Capital (WACC) and the assumption for the long-term, stable perpetual growth rate in free cash flows. Weighted Average Cost of Capital (WACC) 9% Long-term Perpetual FCF Growth 2% Implied Terminal Multiple (Perpetual Growth Method) 14.6x Next, use the Terminal Multiple and multiply it to the exit year's Free Cash Flows to the Firm (exit year n is 10 in our example). Free Cash Flown (n = Year 10 in this example) 5,254 Terminal Value 76,564 Finally, calculate the Net Present Value of the Terminal Value using the Weighted Average Cost of Capital (WACC). You are discounting by the WACC for year n, the exit year. Net Present Value of Terminal Value 32,341 (6) Use the NPV of the FCFF and the Terminal Value to Determine a Target for Equity Value Per Share Net Present Value of Free Cash Flows to the Firm 24,606 Net Present Value of Terminal Value 32,341 Terminal Value Percent of Pre Finance Value 57% PRE FINANCE VALUE 56,948 + Net Cash 3,119 - Other Commitments/Noncontrolling Interest EQUITY VALUE AT PRICE TARGET 60,067 TARGETED EQUITY VALUE PER SHARE $75.84 Average Shares Outstanding, Year-end 792 The 52-week trading range for ATVI is $44.81 - $76.75, with the low achieved intraday during the pandemic in March 2020. The consensus price target among publishing analysts for ATVI is $78.73. If ATVI is currently trading at $76, do you believe ATVI's shares are attractive based on our DCF? Yes Most positive investment recommendations, a "Buy" rating, depend upon at least 15% upside potential.

Finally, calculate the Net Present Value of the Terminal Value using the Weighted Average Cost of Capital (WACC). You are discounting hv the WACC for vear n. the exit vear (6) Use the NPV of the FCFF and the Terminal Value to Determine a Target for Equity Value Per Share The 52-week trading range for ATVI is $44.81 - $76.75, with the low achieved intraday during the pandemic in March 2020 . The consensus price target among publishing analysts for ATVI is $78.73. If ATVI is currently trading at \$76, do you believe ATVI's shares are attractive based on our DCF? Most positive investment recommendations, a "Buy" rating, depend upon at least 15% upside potential