Income Approaches: Quicksilver Software Co

question 4

Multiple Choice

Income approaches: Quicksilver Software Co. is expected to grow rapidly in the next three years and then have no growth for the foreseeable future. The company expects free cash flows of $9.1 million, $11.4 million, and $17.7 million over the next three years, and thereafter its cash flows will stay constant. The company has no nonoperating assets. If the appropriate WACC is 12 per cent and debt of 44.5 million, what is the equity value of this business? Round to the nearest million.

• A) $135 million
• B) $105 million
• C) $45 million
• D) $90 million

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Definitions:

True Zero Point

In measurement scales, a true zero point indicates the absence of the quantity being measured, allowing for ratios to be meaningfully calculated.

Interval Level Variables

Interval level variables are a type of quantitative data where the intervals between values are meaningful, but the data lack a true zero point, allowing for the measurement of difference but not ratio.

Ratio Level Variables

Variables that have a true zero point and can be compared in terms of multiples.

Categorical

Pertaining to data or variables that represent categories, qualities, or characteristics without inherent numerical value.