You have just graduated and are working at a small company. The CEO is thinking...
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You have just graduated and are working at a small company. The CEO is thinking about going public and has asked you, the only member of the team with a business degree, to estimate the value of the equity by Monday. Thankfully, you remember that you learned how to do this in your FIN310 class! You have come up with the following inputs to get back to the CEO:
2021 free cash flow: $550,000
2022 free cash flow: $575,000
2023 free cash flow: $605,000
Annual FCF growth after 2023: 3%
2020 EBIT: $850,000
2020 Depreciation: $150,000
2020 earnings: $410,000
Company WACC (discount rate): 11%
Total debt: $1MM
Please develop an equity valuation for the business using the free cash flow valuation method. Please also identify two additional equity valuation methods, and describe when each of those methods is best used to value a company's equity.
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