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发表于 2011-3-18 15:20 | 只看该作者

Reading 43: Free Cash Flow Valuation-LOS l 习题精选

2011, face, valuation, expected, center
Session 12: Equity Investments: Valuation Models
Reading 43: Free Cash Flow Valuation

LOS l: Discuss approaches for calculating the terminal value in a multistage valuation model.

 

 

In five years, a firm is expected to be operating in a stage of its life cycle wherein its expected growth rate is 5%, indefinitely; its required rate of return on equity is 11%; its weighted average cost of capital is 9%; and the free cash flow to equity in year 6 will be $5.25 per share. What is its projected terminal value at the end of year 5?

A)
 $87.50.
B)
 $51.93.
C)
 $131.25.

 

Terminal value = FCFE / (k ? g) = $5.25 / (0.11 ? 0.05) = $87.50

[此贴子已经被作者于2011-3-21 11:30:17编辑过]

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土豆妮

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2#
发表于 2011-3-18 15:20 | 只看该作者

Terminal value in a multi-stage free cash flow to equity (FCFE) valuation model is often calculated as the present value of:

A)
 a two-stage valuation model's price.
B)
 free cash flow divided by the growth rate.
C)
 FCFE divided by the total of required rate on equity minus growth.

Terminal values are usually calculated as the present value of the price produced by a constant-growth model as of the beginning of the last stage, which is FCFE / (required rate on equity – growth).

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土豆妮

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3#
发表于 2011-3-18 15:20 | 只看该作者

Terminal value in multi-stage free cash flow valuation models is often calculated as the present value of:

A)
 a two-stage valuation model's price.
B)
 free cash flow divided by the growth rate.
C)
 a constant growth model's price as of the beginning of the last stage.

Terminal values are usually calculated as the present value of the price produced by a constant-growth model as of the beginning of the last stage.

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土豆妮

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4#
发表于 2011-3-18 15:20 | 只看该作者

In the two-stage FCFE model, the required rate of return for calculating terminal value should be:<

A)
 lower than the required rate of return used for the high-growth phase.
B)
 higher than the required rate of return used for the high-growth phase.
C)
 equal to the average required rate of return for the industry.

In most cases, the required rate of return used to calculate the terminal value should be lower than the required rate of return used for initial high-growth phase. During the stable period the firm is less risky and the required rate of return is therefore lower.

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