L2: Private Company Valuation (Equity)
Hi all, looking for some assistance with this question from the CFA Qbank on Private Company Valuation (under Equity Valuation). Please see the uploaded image for reference on the question and the provided answer.
I am able to match the FCFF cash flows at year 1, year 2, and the terminal value. However, when discounting back to the find the present value (firm value), I do not match the calculated firm value per the answer. Here's my setup which I calculated on the BA II plus:
CF_0 = 0
CF_1 = 27,000,000
CF_2 = 29,160,000 + 185,895,000 = 215,055,000
Using a WACC = 18%, I am getting a calculated NPV =177,330,508.50. However the CFA Qbank answer is getting a calculated firm value of $195,433,139. Any thoughts here? Please let me know where I may have gone wrong in my approach. Not sure if this is an error in the answer? Thanks!
TLDR: Not matching the calculated firm value per CFA Qbank answer. Looking for help on where I may have gone wrong.
Posted Apr 8, 2025, 9:10 PM UTC