You work again for the company which asked you to evaluate its financial performance (see module 5). You calculated the cost of capital (question 1: WACC = 8%) and concluded that the company was profitable (module 6) with a positive economic profit of 12.

Now, the firm wants you to calculate its fundamental value using the Discounted Free Cash-Flows method. You already know the WACC, the capital employed and the EBIT, but you need additional information:

• CE = 100 = 60 (non-current assets) + 40 (working capital requirement)
• Capital expenditures (capex) = 6
• Depreciation = 4.2
• Expected growth = 3%

Let me remind you the Free Cash-Flow (FCF) formula:

FCF_i = EBITDA_i * (1 – CTR) + CTR * Depreciation_i – Capex_i – ∆WCR_i

The company is supposedly at maturity, so you can use the following formula for the Enterprise Value (EV):

EV = FCF₀* (1 + g) / (WACC – g)

As FCF₀ * (1 + g) = FCF₁, you consider that the data provided above are related with year 1 (to simplify a bit the formula…), then:

EV = FCF₁ / (WACC – g)