Option #2: Case: Electronix Inc. Valuation

Electronix Inc. manufactures electronic products. The company's weighted average cost of capital is 8 percent. The company forecasted the following free cash flows for the next 20 years:

Year Free Cash Flows

1 $15,000,000

2 $16,200,000

3 $21,000,000

4 $23,000,000

5 $27,000,000

6-10 $25,000,000 per year

11-20 $21,000,000 per year

• Prepare a valuation report for Electronix Inc. using the discounted cash flow approach.
• Identify the accounts taken into consideration in the discounted cash flow method.
• Compare the difference between future income method and the discounted future cash flow method.