Your company has $440,000 to invest in one of the following:
Company 1: You are determining whether to purchase another company or firm.
A firm has projected free cash flows of $30,000 for Year 1, $50,000 for Year 2, 80,000 for Year 3, 110,000 for Year 4, and 130,000 for Year 5. The projected terminal value at the end of Year 5 is $300,000. The firm’s Weighted Average cost of Capital (WACC) is 12.0%. $440,000 Investment.
Company 2: You are determining whether to purchase another company or firm. A firm has projected free cash flows of $40,000 for Year 1, $60,000 for Year 2, 80,000 for Year 3, 100,000 for Year 4, and 120,000 for Year 5. The projected terminal value at the end of Year 5 is $300,000. The firm’s Weighted Average cost of Capital (WACC) is 12.0%. $440,000 Investment.
Create a Microsoft® Excel® document to determine the Discounted Cash Flow (DCF) value under each scenario for the information provided above. Show calculations.