Loading...
CFA Level 1
Equity Investments

Calculating Terminal Value in FCF Model

Hard Equity Valuation Techniques Free Cash Flow Models

An analyst is valuing a company using the Free Cash Flow (FCF) model. The company is expected to generate free cash flows of $10 million, $12 million, and $15 million in Years 1, 2, and 3, respectively. The analyst estimates a terminal growth rate of 4% and will discount cash flows using a discount rate of 10%. What is the present value of the terminal value of the company at the end of Year 3?

Hint

Submitted9.5K
Correct8.1K
% Correct85%