Hi, Can I know that how to get the answer for the FCFF Yr1 91800000 as refer to the Answer solution.

Solution Year 1 2 3 4 5 6 7 8 9 10 Total PV FCFF 91800000 105570000 121405500 139616325 160558773.8 184642589.8 212338978.3 244189825 280818298.8 322941043.6 PV of Synergy $76,500,000.00 $73,312,500.00 $70,257,812.50 $67,330,403.65 $64,524,970.16 $61,836,429.74 $59,259,911.83 $56,790,748.84 $54,424,467.64 $52,156,781.49 $636,394,025.84 Terminal value 6,781,761,915.66 PV of TV 1,095,292,411.19 PV(0) 1,095,292,411.19 + 636,394,025.84 = 1,731,686,437.03 Therefore: Maximum purchase price of Excite 3,500,000,000 + 1,731,686,437.03 = 5,231,686,437.03 Compared to 6,700,000,000.00 (Merger price) @Home overpaid for Excite Additional assumptions To a greater extent, the valuation is heavily dependent on the choice of assumptions concerning growth rate in the high growth and stable growth periods and discounts rates for respective periods Almost two-third of the total valuation is dependend on the astimation of the residual value or the value of cash flows befond the tenth year which is likely to be less accurate than estimation of cash flow during the earlier years of the forecast period. Recommendations There are other revenue sources which could be considered such as trading additional products and services to the Excite customer base and revenue from selling AD space on the site Analysis of recent transactions of similar companies in the industry is another sound option for the analysts Reducing the number of assumptions may lead to more accurate analysis Week 1: Discounted Cash Flow Case The Hunt for Elusive Synergy@Home Acquires Excite Background Information Prior to @Home Network's merger with Excite for $6.7 billion, Excite's market value was about $3.5 billion. The new company combined the search engine capabilities of one of the bestknown brands (at that time) on the Internet, Excite, with @Home's agreements with 21 cable companies worldwide. @Home gains access to the nearly 17 million households that are regular users of Excite. At the time, this transaction constituted the largest merger of Internet companies ever. At the time of the transaction, the combined firms, called Excite @Home, displayed a P/E ratio in excess of 260 based on the consensus earnings estimate of $0.21 per share. The firm's market value was $18.8 billion, 270 times sales. Investors had great expectations for the future performance of the combined firms, despite their lackluster profit performance since their inception. @Home provided interactive services to home and business users over its proprietary network, telephone company circuits, and through the cable companies' infrastructure. Subscribers paid $39.95 per month for the service. Assumptions Excite is properly valued immediately prior to announcement of the transaction. Annual customer service costs equal $50 per customer. Annual customer revenue in the form of @Home access charges and ancillary services equals $500 per customer. This assumes that declining access charges in this highly competitive environment will be offset by increases in revenue from the sale of ancillary services. None of the current Excite user households are current @Home customers. New @Home customers acquired through Excite remain @Home customers in perpetuity. @Home converts immediately 2 percent or 340,000 of the current 17 million Excite user households. @Home's cost of capital is 20 percent during the growth period and drops to 10 percent during the slower, sustainable growth period; its combined federal and state tax rate is 40 percent. Capital spending equals depreciation; current assets equal current liabilities. FCFF from synergy increases by 15 percent annually for the next 10 years and 5 percent thereafter. Its cost of capital after the high-growth period drops to 10 percent. The maximum purchase price @Home should pay for Excite equals Excite's current market price plus the synergy that results from the merger of the two businesses. Discussion Questions 1. Use discounted cash flow (DCF) methods to determine if @Home overpaid for Excite. 2. What other assumptions might you consider in addition to those identified in the case study? 3. What are the limitations of the discounted cash flow method employed in this case