You are valuing a company as of the end of Year $0.$ The company is privately owned and

$100\%$ equity financed. The company$$s free cash flow for the current year, Year $0,$ is $$40$ million,

and management expects a free cash flow of $$46\mathrm{.}8$ million next year $($Year $1).$ Management

expects the company$$s free cash flows to grow at a growth rate of $3\%$ for every year after Year

$1.$ The company has one comparable company, which also uses only equity financing. The total

firm $($enterprise$)$ value of the comparable company is $$1,283\mathrm{.}3$ million. Its free cash flow for the

current year, Year $0,$ is $$60$ million, and management expects its free cash flow to be $$115\mathrm{.}5$

million in the following year, Year $1.$ The comparable company is also expected to grow at a

growth rate of $3\%$ for every year after Year $1.$ Management believes that the two companies

have the same cost of capital of $11\%.$

$($a$)$ What is the free cash flow multiple of the comparable company based on its Year $0$ and its

expected Year $1$ free cash flows? Why are they different?

$($b$)$ Value the privately owned company using the free cash flow market multiples of the

comparable company based on both the Year $0$ and expected Year $1$ free cash flows. Why are the

valuations different, and which one is more likely to be the better valuation?

$($c$)$ Measure the value of the privately owned company using the discounted cash flow valuation

method and compare it to the free cash flow multiple valuations

$($EXCEL ANSWERS PLEASE$)$