# Hi,</o:p> </o:p> Please read carefully.</o:p> </o:p> There are 2 attachments.</o:p> 1 st attachment is the actual homework.</o:p> 2 nd attachment is from my...

TV Homework Template
1. What percentage the Present Value of Terminal Value contributes to the total Enterpise value?
2. How sensitive is your valuation inputs?
You may use the template attached or create your own. Excel submission is enough.
Enterprise Valuation & Terminal Value
Given                            Solution Legend
Gross Margin    40%                        Value given in problem
Fixed Costs    \$ 2,000                        Formula/Calculation/Analysis required
Revenue Growth Rate for Years 1 - 5    10%                        Crystal Ball Input
FCF Steady Growth    3%                        Crystal Ball Output
Discount Rate    12%
Year 1 Revenue    \$ 5,000
Tax Rate    21%
Terminal Year    5

1    2    3    4    5
Revenues
Gross profits
Fixed Costs
Net Operating Income
Taxes
Free Cash Flow
NPV for Years 1-5 Cash Flows
Terminal Value (as of Year 5)
PV of Terminal Value
Enterprise Value
PV of Terminal Value / Enterprise Value
(
)
s
g
WACC
FCF
TV
-
=
6
5
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s
gWACC
FCF
TV

6
5

TV Homework
Example - Enterprise Valuation & Terminal Value
Given                            Solution Legend
Gross Margin    40%                        Value given in problem
Fixed Costs    \$ 2,000                        Formula/Calculation/Analysis required
Revenue Growth Rate for Years 1 - 5    10%                        Crystal Ball Input
FCF Steady Growth    3%                        Crystal Ball Output
Discount Rate    12%
Year 1 Revenue    \$ 5,000
Tax Rate    35%
Terminal Year    5

1    2    3    4    5
Revenues        \$ 5,000    \$ 5,500    \$ 6,050    \$ 6,655    \$ 7,321
Gross profits        2,000    2,200    2,420    2,662    2,928
Fixed Costs        (2,000)    (2,000)    (2,000)    (2,000)    (2,000)
Net Operating Income        \$ -    \$ 200    \$ 420    \$ 662    \$ 928
Taxes        \$ -    \$ (70)    \$ (147)    \$ (232)    \$ (325)
Free Cash Flow        \$ -    \$ 130    \$ 273    \$ 430    \$ 603
NPV for Years 1-5 Cash Flows    \$ 914    <-- =NPV(WACC,D21:H21)
PV of Terminal Value     \$ 3,918    <-- =C24/(1+WACC)^C12
Enterprise Value     \$ 4,832    <-- =C23+C25
PV of Terminal Value / Enterprise Value    81%
Data for Charts:
Terminal Value / Enterprise Value            Input
Variable    Downside    Upside    Range    Downside    Upside    Base Case
Discount Rate    83%    79%    4%    11%    13%    12%
FCF Steady Growth    80%    83%    3%    2%    4%    3%
Revenue Growth Rate for Years 1 - 5    81%    81%    0%    9%    11%    10%
Terminal Value / Enterprise Value
Variable    10.0%    30.0%    50.0%    70.0%    90.0%
Discount Rate    83%    82%    81%    80%    79%
FCF Steady Growth    80%    80%    81%    82%    83%
Revenue Growth Rate for Years 1 - 5    81%    81%    81%    81%    81%
Sensitivity Chart
Terminal Value / Enterprise Value
Discount Rate    0.1    0.3    0.5    0.7    0.9     XXXXXXXXXX     XXXXXXXXXX     XXXXXXXXXX     XXXXXXXXXX     XXXXXXXXXX    FCF Steady Growth    0.1    0.3    0.5    0.7    0.9     XXXXXXXXXX     XXXXXXXXXX     XXXXXXXXXX     XXXXXXXXXX     XXXXXXXXXX    Revenue Growth Rate for Years 1 - 5    0.1    0.3    0.5    0.7    0.9     XXXXXXXXXX     XXXXXXXXXX     XXXXXXXXXX     XXXXXXXXXX     XXXXXXXXXX    Percentiles of the variables
Terminal Value / Enterprise Value
Downside    11%
2%
9%
Discount Rate    FCF Steady Growth    Revenue Growth Rate for Years 1 - 5     XXXXXXXXXX     XXXXXXXXXX     XXXXXXXXXX    Upside    13%
4%
11%
Discount Rate    FCF Steady Growth    Revenue Growth Rate for Years 1 - 5     XXXXXXXXXX     XXXXXXXXXX     XXXXXXXXXX

## Solution

Prateek answered on Apr 10 2022
TV Homework Template
1. What percentage the Present Value of Terminal Value contributes to the total Enterpise value?
2. How sensitive is your valuation inputs?
You may use the template attached or create your own. Excel submission is enough.
Enterprise Valuation & Terminal Value
Given                            Solution Legend
Gross Margin    40%                        Value given in problem
Fixed Costs    \$ 2,000                        Formula/Calculation/Analysis required
Revenue Growth Rate for Years 1 - 5    10%                        Crystal Ball Input
FCF Steady Growth    3%                        Crystal Ball Output
Discount Rate    12%
Year 1 Revenue    \$ 5,000
Tax Rate    21%
Terminal Year    5

1    2    3    4    5
Revenues        \$ 5,000    \$ 5,500    \$ 6,050    \$ 6,655    \$ 7,321
Gross profits        2,000    2,200    2,420    2,662    2,928
Fixed Costs        2,000    2,000    2,000    2,000    2,000
Net Operating Income        \$ -    \$ 200    \$ 420    \$ 662    \$ 928
Taxes        \$ -    \$ 42    \$ 88    \$ 139    \$ ...
SOLUTION.PDF

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