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TV Homework Template
        Please answer the following question:
        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
(
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s
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WACC
FCF
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FCF
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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)
        Terminal Value (as of Year 5)    $ 6,905    <-- =H21*(1+SteadyGrowth)/(WACC-SteadyGrowth)
        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
Tornado Diagram
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    
Answered Same DayApr 10, 2022

Solution

Prateek answered on Apr 10 2022
8 Votes
TV Homework Template
        Please answer the following question:
        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    $ ...
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