Wall Street Prep Lesson 2: Discounted Cash Flow Exercise

[smokenfly514]

How/where did you get terminal value? Thanks

[ZmeY0]

@smokenfly514

Hey, for terminal value you use formula for PV of growing perpetuity, which you receive at exit year, here the link:

In video I grew cash flow to next year by using long term growth grate, to find D1 , and then r which is discount rate and g which is growth rate, were given to us. In this case 9 and 3 percent. Then I simply used all the data and put them in formula of perpetuity.

[ZmeY0]

@smokenfly514

Unfortunately link wouldn't post, so here the equation:

D1/(r-g)

where D1 is coupon payment in year one (or in this case exit year)

r is discount rate

g is growth rate

Hope it helps