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Please answer both questions with the following data provided!! It would be greatly appreciated!! The CFO of an emerging technology firm wants to evaluate a
Please answer both questions with the following data provided!! It would be greatly appreciated!!
The CFO of an emerging technology firm wants to evaluate a competitor that might be a target for an acquisition. The target firm, SRT, Inc., has developed cutting edge technology that is expected to enjoy a very high level of sales growth in the early years of its existence. The most recent historical enterprise cash flow for the target was $65. Expected annual cash flow growth rates on the target are provided below. Due to the emergence of competitive products, cash flow is expected to grow at a rate of 6% annually after the fifth year. The discount rate for the first five years is estimated to be 15% and then drop to 12% beyond the fifth year. Year Cash Flow 1 68% 2 173% 3 95% 4 49% 5 5 43% Because of the variable nature of the cash flows of SRT, Inc., what is the best financial tool to use to determine the value of the cash flows for years 1-5? O A. Internal rate of return O B. Net present value O C. Present value of an annuity O D. Future value of an annuity O E. Constant growth model What percentage SRT, Inc.'s of total enterprise value is comprised of the present value of the firm's terminal value? O A. 86% O B. 80% O C. 77% O D.68% O E. 92%Step by Step Solution
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