Using the PGM to determine terminal value at a perpetual gro…
Using the PGM to determine terminal value at a perpetual growth rate of 3 percent, calculate the value of this target using end-of-period discounting. Target capital structure is 60% debt. Levered Beta is estimated to be 1.1. Market risk premium estimated to be 6%. Book value of equity is 50% of total assets on the balance sheet. Marginal tax rate is 40%. Current yield on the firm’s outstanding bonds is 7%. 10 Year U.S. Treasury is yielding 2.4%. Year +1 Year +2 Year +3 Year +4 Year +5 Forecasted Free Cash Flow $104 $117 $133 $150 $167 Enter (and clearly label) the following in the input box provided Cost of Equity = WACC = Terminal Value at Year +5 = Enterprise Value =