You Decide to Value a Steady‐state Company Using Probability‐weighted Scenario

question 5

Multiple Choice

You decide to value a steady‐state company using probability‐weighted scenario analysis.In scenario 1,NOPLAT is expected to grow at 8 percent,and ROIC equals 20 percent.In scenario 2,NOPLAT is expected to grow at 2 percent,and ROIC equals 10 percent.Next year's NOPLAT is expected to equal $100 million,and the weighted average cost of capital is 12 percent.Using the key value driver formula,what is the enterprise value in each scenario? If each scenario is equally likely,what is the enterprise value for the company?

• A)Value in scenario 1 is $1,500m;value in scenario 2 is $800m;weighted value = $1,150m.
• B)Value in scenario 1 is $800m;value in scenario 2 is $1,500m;weighted value = $1,150m.
• C)Value in scenario 1 is $800m;value in scenario 2 is $1,500m;weighted value = $2,300m.
• D)Value in scenario 1 is $1,500m;value in scenario 2 is $800m;weighted value = $2,300m.

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