Question details

We first determine the present value of the free cash flows New Tech expects over the next 5 years
$ 20.00

Project Description:

A) To Do: Calculate the value of New T today, using the data given in Table 5.8 and the preceding assumptions

b) Case Study Questions: You must do both a DCF analysis and a market multiple analysis (answer the questions at the end of the case).
G starts with the assumption that potential investors would likely want to exit around 2017.
1. Assuming that the investors own 30% of New T’s shares at the time of exit and that the 2017 value would be three times the 2017 EBITDA, what would be the value of the firm in 2017?
2. What would be the investor’s share of the 2017 value?
3. What would be the return on a $1 million investment in the company today at the same valuation?
4. Is your calculated return adequate? If not, how can it be made acceptable to investors?

 

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