E-BDTM&AVM

E-BDTM&AVM - Third Branch: Option to Delay...

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Exhibit 7-17. Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 First Branch: Option for Immediate Investment/Acquisition Enterprise Cash Flows Projected Target Firm Cash Successful Case -300 30 35 40 45 50 Unsuccessful Case -300 -5 -5 -5 -5 -5 Weighted Cash Flows Successful Case (60%) 0 18 21 24 27 30 Unsuccessful Case (40% 0 -2 -2 -2 -2 -2 Expected Enterprise Cash Flow -300 16 19 22 25 28 Expected NPV Yr 1-8 @ 15% Expected Terminal Value @ 13%; sustainable growth rate = 5% Expected Total NPV Second Branch: Option to Abandon (Divest or Liquidate) Enterprise Cash Flows Projected Target Firm C Successful Case -300 30 35 40 45 50 Unsuccessful Case -300 -5 -5 -5 -5 -5 Weighted Cash Flows Successful Case (60%) 0 18 21 24 27 30 Unsuccessful Case (40%) 0 -2 -2 150 0 0 Expected Enterprise Cash Flow -300 16 19 174 27 30 Expected PV Yr 1-6 @15% Expected Terminal Value @ 13%; sustainable growth rate = 5% Expected Total PV
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Unformatted text preview: Third Branch: Option to Delay Investment/Acquisition Enterprise Cash Flows Projected Target Firm C Successful Case-300 35 40 45 50 Unsuccessful Case-300 Weighted Cash Flows Successful Case (60%) 21 24 27 30 Unsuccessful Case (40%) Expected Enterprise Cash Flow-300 21 24 27 30 Expected NPV @ 15% Expected Terminal Value @ 13%; sustainable growth rate = 5% Expected Total NPV Note: The NPV for the delay option is discounted at the end of year 1, while the other options are discounte ion Tree Year 6 Year 7 Year 8 Year 9 Flows 55 60 65-5-5-5 33 36 39-2-2-2 31 34 37-166 159-7 Cash Flows 55 60 65-5-5-5 33 36 39 33 36 39-75 167 92 Cash Flows 55 60 65 70 33 36 39 42 33 36 39 42-146 180 34 ed from year 0 (I.e., the present)....
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E-BDTM&AVM - Third Branch: Option to Delay...

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