The Second Acquisition Target Is A Privately Held Company In A Growing Industry (1)

The second acquisition target is a privately held company in a growing industry. The target has recently borrowed $40 million to finance its expansion; it has no other debt or preferred stock. It pays no dividends and currently has no marketable securities. KFS expects the company to produce free cash flows of -$5million in 1 year, $10 million in 2years, and $20 million in 3 years. After 3 years, free cash flow will grow at a rate of 6%. The target’s WACC is 10% and it currently has 10 million shares of stock outstanding(2)What is its intrinsic value of equity on a piece-per-share basis?

QUESTIONThe second acquisition target is a privately held company in a growing industry. The target has recently borrowed $40million to finance its expansion; it has no other debt or preferred…

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