Value of Company and Discounted Cash Flows

Please refer to the attached file for the complete solution

Solution:
Value of the company = Sum of PV of free cash flows in the non-constant growth periods + PV of value of company at the end of Non-constant growth period

Below given are the cash flows in the non-constant growth periods (till year 10) and their sum of PV.
Year Cash flows PV factor PV of
at 11.5% cash flows
1 $3,000,000 0.8968609865 $2,690,582.96
2 $6,000,000 0.8043596292 $4,826,157.78
3 $2,000,000 0.7213987706 $1,442,797.54
4 $2,500,000 0.6469944131 $1,617,486.03
5 $3,250,000 (Year 4 cash flow + 30%) 0.5802640476 $1,885,858.15
6 $4,225,000 (Year 5 cash flow + 30%) 0.5204161862 $2,198,758.39
7 $5,492,500 0.4667409742 $2,563,574.80
8 $7,140,250 0.4186017705 $2,988,921.29
9 $9,282,325 0.3754275969 $3,484,840.97
10 $12,067,023 0.3367063649 $4,063,043.28
Sum of PV of cash flows in the initial growth period = $27,762,021.19

The non-constant growth period ends at Year 10. Therefore, we have to find the value of the company at the end of Year 10.

Value of Company at the end of year 10 = Free cash flows of Year 11 / (WACC - growth-rate)

FCF of Year 11 = Year 10 FCF * (1+g) = $12,067,023 * (1+.08) = $13,032,384.30

Value of Company at the end of Year 10 = 13,032,384.30/(11.5%-8%) $372,353,837.14

PV of Value of company at the end of year 10 = 372,353,837.14/(1+.115)^10 $125,373,906.97

Last step:
Sum of PV of FCFs in the non-constant growth periods $27,762,021.19
PV of Value of company at the end of Year 10 $125,373,906.97
Value of the Company at present = $153,135,928.17

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