What Is the Present Value of a Company with a WACC

question 108

Essay

What is the present value of a company with a WACC of 12%,and the following cash flows for years 1 to 5,respectively: $1 million,$1.25 million,$1.5 million,$1.75 million,$2 million.Assume the firm will then grow at 5% per year,indefinitely.

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Definitions:

Department Manager

An individual responsible for overseeing the operations, budget, and personnel of a specific department within a company.

Revenues

The total income generated by a company from its business activities, such as the sale of goods or provision of services, before any expenses are deducted.

Profit Margin

A financial ratio that shows the percentage of revenue that exceeds the cost of goods sold, indicating the efficiency at which a company generates profit.

Activity Base

A measure used to allocate costs to products or services, based on the amount of activity or volume of services or products that incur those costs.