Question
A. Your company is forecasting the following levels of net income over the next five years. Year 1: $150,000 Year 2: $200,000 Year 3: $225,000
A. Your company is forecasting the following levels of net income over the next five years.
Year 1: $150,000
Year 2: $200,000
Year 3: $225,000
Year 4: $275,000
Year 5: $300,000
An investor approaches you about an investment. He wants to use 35% as a discount rate in computing your company's value. Similar companies have P/E ratios of 15. Calculate your company's current value using the VC method.
B. Your company has a forecast net income of the following.
Year 1: $300,000
Year 2: $500,000
Year 3: $750,000
Companies similar to yours have P/E ratios of 12. What is your company's terminal value?
C. What is "terminal value"?
A company's P/E ratio.
The discounted value of a company.
The value of a company today.
The value of a company at the end of some future time period.
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