Investor Currency (Centralized) and Foreign Currency (Decentralized) DCF ApproachesU.K./ France: A company in the U.K....
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Investor Currency (Centralized) and Foreign Currency (Decentralized) DCF ApproachesU.K./ France: A company in the U.K. is acquiring a company in France, and the U.K. company is attempting to value the French company in GBP. After repatriation, taxes, and country-related risks are taken into consideration, the free cash flow forecasts of the French company for the next three years, stated in Euros, are 22.2 million, 25.4 million, and 30.7 million, respectively; also, the continuing value of the company as of the end of Year 3 is 290.5 million. The appropriate risk-adjusted discount rate for this companys cash flows stated 906 Chapter 17 | Valuing Businesses Across Borders in GBP, is 14% and is constant in each year. Both companies are only financed with common equity. Use the information in Exhibit P17.1 to measure the value of the French company in GBP under both the investor currency and foreign currency discounted cash flow methods.
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