Corporate Valuation is a fundamental concept in finance. A corporate valuation model is used to determine value of a firm with no history of dividends, or divisions of a larger firm. A firm's value is determined by its ability to generate cash flow both now and in the future. The corporate model first calculates the firm's free cash flows, then finds their present values to determine the firm's value: FCFnation=[EBTT(lT)+Depreciationandamot=PVofexpectedfuturefreecashflows Here, EBT is earnings before interest and taxes; FCF; is the free cash flow generated in year t before any payments are made to any investors; so it must be used to compensate common stockholders, preferred stockholders, and bondholders; WACC is weighted average cost of all the firm's capital, such as debt, preferred stock, and common equity. Free cash flows are forecasted for 5 to 10 years, after which it is assumed that the company reaches its horizon date. That is, the final explictiy forecasted FCF will grow at some long-run constant rate. You can use the following formula to calculate the market value of the company's operations as of that date: =WACC-tar.refat Market value of company = Marker whe of company' operations + Market value of company's nonoperating ais Corporate Valuation is a fundamental concept in finance. A corporate valuation model is used to determine value of a firm with no history of dividends, or divisions of a larger firm. A firm's value is determined by its ability to generate cash flow both now and in the future. The corporate model first calculates the firm's free cash flows, then finds their present values to determine the firm's value: FCFnation=[EBTT(lT)+Depreciationandamot=PVofexpectedfuturefreecashflows Here, EBT is earnings before interest and taxes; FCF; is the free cash flow generated in year t before any payments are made to any investors; so it must be used to compensate common stockholders, preferred stockholders, and bondholders; WACC is weighted average cost of all the firm's capital, such as debt, preferred stock, and common equity. Free cash flows are forecasted for 5 to 10 years, after which it is assumed that the company reaches its horizon date. That is, the final explictiy forecasted FCF will grow at some long-run constant rate. You can use the following formula to calculate the market value of the company's operations as of that date: =WACC-tar.refat Market value of company = Marker whe of company' operations + Market value of company's nonoperating ais Suppose your company's WACC=13% and you know that the free cash flow of your company next year is going to be FCF1=$24.6 and then FCF is expected to grow at 8%. Then the FCF2 is the firm's value today is and the company's horizon value in one year is This means that Suppose your company's WACC=13% and you know that the free cash flow of your company next year is going to be FCF1=$24.6 and then FCF is expected to grow at 8%. Then the FCF2 is the firm's value today is and the company's horizon value in one year is This means that The following table shows projected free cash flows for the next three years for Care4uMed Corp., a company producing portable oxygen machines. After the three year period, CareduMed is expected to grow at a constant rate of 8% and its WaCC is 13%. Care4UMed has $15 miliion of debt and $210 million sharehlof stock outstanding. According to the video, what is the formula for Care4uMeds horizon value? HV3=(wACC+E)2fCF4HV1=WAC-1rerc4HV3=HAACEICGHV3=(WACC(1)!ECF Care4umeds horizon value is milion. According to the video, what is the formula foc the firm's value today? V0=C1+PF1+1C1+MN1 The following table shows projected free cash flows for the next three years for Care4uMed Corp., a company producing portable oxygen machines. After the three year period, CareduMed is expected to grow at a constant rate of 8% and its WaCC is 13%. Care4UMed has $15 miliion of debt and $210 million sharehlof stock outstanding. According to the video, what is the formula for Care4uMeds horizon value? HV3=(wACC+E)2fCF4HV1=WAC-1rerc4HV3=HAACEICGHV3=(WACC(1)!ECF Care4umeds horizon value is milion. According to the video, what is the formula foc the firm's value today? V0=C1+PF1+1C1+MN1 According to the video, what is the formula for the firm's value today? V0=(1+HACC2FCF1+(1+W1CC2FC1+(1+WACC3FF1+H3V0=(1+WACC2FCF1+(1+WACC2FCF2+(1+WACC2FCF1+(1+WACC2WV1V0=(1+WACCS4A1V0=(1+WAC)2FCC1+(1+WAC)3FCC3+(1+WCC)1FC1+(1+W+C)2WV3 Care4uMed's value today is million. According to the video, the value of equity is found as CareduMed's equity is mililion. According to the video, the price per share is found as CareduMed's the price per share is Step 3t Practicet Corporate Valuation Now it's time for you to practice what yourve leamed. The following table shows projected free cash flows for the next four years for quick sky Corp., a compony profucing wind turbines. According to the video, what is the formula for the firm's value today? V0=(1+HACC2FCF1+(1+W1CC2FC1+(1+WACC3FF1+H3V0=(1+WACC2FCF1+(1+WACC2FCF2+(1+WACC2FCF1+(1+WACC2WV1V0=(1+WACCS4A1V0=(1+WAC)2FCC1+(1+WAC)3FCC3+(1+WCC)1FC1+(1+W+C)2WV3 Care4uMed's value today is million. According to the video, the value of equity is found as CareduMed's equity is mililion. According to the video, the price per share is found as CareduMed's the price per share is Step 3t Practicet Corporate Valuation Now it's time for you to practice what yourve leamed. The following table shows projected free cash flows for the next four years for quick sky Corp., a compony profucing wind turbines. The following table shows projected free cash flows for the next four years for Quick sky corp., a company producing wind turbines. After the four year period, Quick Sky is expected to grow at a constant rate of 8% and its WACC is 13%. Quick Sky has $15 million of debt and $210 mililon shares of stock outstanding. Quick Sky's value today is million and the price per share today is
