Question
Could somebody walk me through the steps on how to figure this problem out on my financial calculator? The answers are enterprise value = 874,257
Could somebody walk me through the steps on how to figure this problem out on my financial calculator? The answers are enterprise value = 874,257 and equity value is 474,257.
2 Enterprise Valuation Opex Capital is a small investment advisory firm located in Portland, Oregon, that has been hired by Winston Winery to estimate the value of Hilco Wines. Hilco is a small winery that is being considered for purchase by Winston. Opex has obtained the financial statements of Hilco and prepared the following estimates of the firms free cash flow for the next five years: Year Cash Flows 1 $100,000 2 $120,000 3 $135,000 4 $150,000 5 $175,000 At the end of five years, Opex has estimated that the winery should be worth approximately five times its Year 5 cash flow. 1. If the appropriate discount rate for valuing the winery is 15%, what is your estimate of the firms enterprise value? 2. Winston Winery plans to borrow $400,000 to help finance the purchase. What is Hilcos equity worth?
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