1. Valuation - FCF Valuation

Use the following information to calculate the enterprise value of PCP in 2015. Use the FCF growth model. Tax rate = 39%, long term growth rate for FCF, g=2.5% per year, WACC =5%, Income from Operations (2015) = $2612 million.

Use the following assumptions: [5 points]

FCF = (1-Tax)*(Income from Operations) + Depreciation (Change in Fixed Assets and Working Capital)

Since there is no information on depreciation and working capital, you can assume that

Depreciation = Change in Fixed Assets and Working Capital. Hence,

• FCF = (1-Tax)*(Income from Operations)
• Analysts expected that PCPs cash flows would grow indefinitely at about the long-term expected real growth rate of the U.S. economy, 2.5%.

1. $ 37.7 Billion
2. $ 63.7 Billion
3. $ 65.3Billion
4. $ 104.5 Billion