Homework Answers
Lets find termianl cash flow
Terminal cash flow = Cash flow for 2024(1+g)/WACC-g
g = growth rate = 3%
Wacc = 8%
Thus Terminal cash flow = 2200(1+3%)/8%-3%
=2200(1+0.03) / 5%
=2200(1.03)/5%
=2266/5%
=45320 $
Now lets calculate present value of FCF
| Years | FCF | PVIF @ 8% | PV |
| A | B | AxB | |
| 2020 | 1000 | 0.9259 | 926 |
| 2021 | 1200 | 0.8573 | 1029 |
| 2022 | 1600 | 0.7938 | 1270 |
| 2023 | 1850 | 0.7350 | 1360 |
| 2024 | 2200 | 0.6806 | 1497 |
| Terminal cash flow | 45320 | 0.6806 | 30844 |
| PV of FCF | 36926 |
Thus valuation of regeneron = PV of FCF - Total Debt
=36926-714
=36212$
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