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CFA Level 2
Equity Investments

Intrinsic Value of DMN Corp based on Free Cash Flow Valuation

Hard Equity Valuation Applications Free Cash Flow Valuation

DMN Corp, a rapidly growing technology firm, has provided the following projected free cash flows (FCF) for the next five years:

Year 1: $15 million

Year 2: $18 million

Year 3: $22 million

Year 4: $26 million

Year 5: $30 million

Beyond Year 5, DMN Corp expects to achieve a stable growth rate of 4%. The firm has a calculated weighted average cost of capital (WACC) of 10%.

Assuming a terminal value calculation is based on the Gordon Growth Model, what is the estimated intrinsic value of DMN Corp's equity based solely on the free cash flow valuation method?

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