Symbyrec Phonic, an electronics manufacturer, is expected to grow rapidly in the next five years and then have a stable growth rate for the foreseeable future. The firm expects free cash flows of $262.5 million next year. These cash flows are expected to grow at a 30 percent rate over the following four years, and thereafter its cash flows will grow at a steady rate of 6 percent per annum. The company has nonoperating assets (NOA) of $31 million in the form of cash. If the appropriate WACC is 9 percent, what is the enterprise value of this business? (Do not round intermediate computations. Round final answer to the nearest million.)

Question

Quizplus · Accepted Answer

The enterprise value is calculated by finding the present value of the expected free cash flows during the high-growth period and the present value of the terminal value, then adding the nonoperating assets. The correct calculation results in an enterprise value of approximately $19,014 million.

Symbyrec Phonic, an Electronics Manufacturer, Is Expected to Grow Rapidly