Valuation Exercise							
"To do a discounted cash flow valuation of a firm and have been
given the following partial inputs.The firm has a tax rate of 40%."							
							
Year	1	2	3	4			
Growth rate - g	20.00%	20.00%	20.00%	5.00%			
EBIT (1-t)	 $100.00 	 $120.00 	 $144.00 	 $151.20 			
							
Cost of Equity	15.00%	14.50%	14.00%	12.50%			
Cost of Debt	7.00%	7.00%	7.00%	7.00%			
Debt Ratio	10.00%	20.00%	30.00%	40.00%			
Equity Ratio	90.00%	80.00%	70.00%	60.00%			
Return on Capital - ROI	25.00%	25.00%	25.00%	15.00%			
							
Results							
	I. stage			II.stage			
EBIT (1-t)	 $100.00 	 $120.00 	 $144.00 	 $151.20 			
 - Reinvestment	 $80.00 	 $96.00 	 $115.20 	 $50.40 	Reinvestment = EBIT (1-t) * Reinvestment Rate		
FCFF	 $20.00 	 $24.00 	 $28.80 	 $100.80 	FCFF = EBIT (1-t) - Reinvestment		
Terminal Value				" $2,411.48 "	"Terminal value=FCFF,II.stage / (WACC-g)"		
Cost of Capital - WACC	13.92%	12.44%	11.06%	9.18%	WACC = (Cost of Equity * Equity Ratio) + (Cost of Debt * Debt Ratio * (1 - Tax Rate))		
PV	 17.56    	 18.98    	 21.02    	" 1,852.91    "	PV I.Stage=FCFF / (1-i)^n		PV II.Stage=Terminal value / (1-i)^n
Value of Firm =	" $1,910.48 "				Value of firm=SUM of PV I.stage + II. stage		
Reinvestment Rate	0.80	0.80	0.80	0.33	Reinvestment Rate = g/ROC