The following table shows the projected free cash flows of an acquisition target

Accounting Sep 21, 2020

The following table shows the projected free cash flows of an acquisition target. The potential acquirer wants to estimate its maximum acquisition price at an 8 percent discount rate and a terminal value in year 5 based on the perpetual growth equation with a 4 percent perpetual growth rate.

year 1 2 3 4 5

free cash flow -910 -455 0 266 832

Part #1 max acquisition price:

Part #2 new disc. rate 7 and new perpetual rate 5

max acquisition price:

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