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9. (optional) (a) In the valuation exercise given in the excel spreadsheet (Model for Problem 9), the terminal value is calculated using a Gordon dividend
9. (optional) (a) In the valuation exercise given in the excel spreadsheet ("Model for Problem 9"), the terminal value is calculated using a Gordon dividend model on the cash flows. Replace this terminal value by the year 5 book value of debt+ equity. This means that you are essentially assuming that the book value correctly predicts the market value. (b) Repeat the above exercise, but this time replace the terminal value by an EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio times year-5 anticipated EBITDA. Show a graph of the equity value of the firm as a function of the assumed year 5 EBITDA ratio, varying this ratio from 6- 14
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