The Terminal Value

thumbs up

Ease your homework burden with top-notch homework help service. Say goodbye to deadlines stress and let our expert tutors handle your assignments effortlessly.

Focus on what truly matters while we handle your homework and grades.

trustpilot ratings

4.2/5

trustpilot ratings

4.7/5

trustpilot ratings

4.8/5

Coming back to the third goal, it is to determine the value of terminal market of the firm. This is the value which gives the value of the firm which can be sold for in the future at time T which can be calculated by the growing pertuity formula as follows:

The Terminal Value 16

Let’s reply the remainder on the cash flow forecast which is direct from the table 202. But here, you will still require the estimates for the growth rate of the company eventually.

Let’s consider the cost of future of capital initially:

20.5 A the Cost of Capital

One can rely on the CAPM in order to determine capital cost for the company Pepsi Co for the year late 2001. If the company is not listed in publicly traded, you can use the data from the comparable company like Coca-Cola. Table 20.5 includes the prices of stock on the company Yahoo, Pepsi Co. and Coca Cola. In order to determine the rate of return in the past, you can use this table to obtain the prices as mentioned below:

The Terminal Value 17

(Considering an example: r = 1,101.75/1,049.34 − 1 ≈ 4.995). With the calculated return rate, one can now determine the required statistics from the historical data:

The Terminal Value 18

This list of the statistical data will help you with the calculation of equity beta from historical data of PepsiCo and Coca-Cola:

The Terminal Value 19
The Terminal Value 20

Now the question here is which estimate is the best one supporting the future equity beta of Pepsi Co?

  • Consider 0.7 as the historical equity beta of Pepsi Co
  • Or you will consider that the beta value must be shrunken towards the beta average βM,M = 1 in market. This case will reflect the market beta as = (7 + 1)/2 = 0.85.
  • You will look for industrial beta which is more reliable and trustable than Pepsi Co own beta as they rely on the historical outlay of a single firm.
  • Or you make an assumption that Coca-Cola and Pepsi Co are similar companies, which means you will choose the value of market beta as 0.46 as an average figure between both the companies which means that the best estimate of beta value will be 0.6.

In order to consider CAPM, one needs to estimate the rate of economy wide which is risk free along with premium of equity:

The risk-free rate: The treasury yield of 5-year and 20 year was calculated as 4.4% and 5.7% in the year end of 2001 respectively. So one can choose 10 years as the rate of interest for Pepsi Co which means rate is 5% per year approximately.

The Equity Premium: Let’s consider that the board members of Pepsi Co. along with management have declared 3% as per the standard estimate.

The Terminal Value 21

So let’s consider this as 7%. This means that estimate of the capital cost for Pepsi Co. is between 5 to 10%.

The Terminal Value 22
The Terminal Value 23

20.5 B the Cost of Capital minus the Growth Rate of cash Flows

You are still in need of an estimation of growth rate of cash flows under expected eternal (E(g)) for the perpetuity formula or we can say, capital cost E(r) subtracted by this rate of growth. One can notice that it is easier to assume the upper bounds which are high on the sustaining rate of growth which is true for lower bounds too.

But a company like Pepsi CO. is hardly to experience lower bound but one can assume the same in order to realize the real rate of growth.

But you need some additional information to estimate the same. The following resources will help you with the required information:

  1. Internal Company information: Getting the internal information from a company like Pepsi CO, can be really tough. But the publically traded information can value at some extend. But if you are an internal analyst of the firm, you can enjoy the ease of internal information easily.
  2. Industry or comparable firm information: If you are lucky to get information on the estimate growth rate of competitors like Coca-Cola, the process becomes simpler.

The Terminal Value 24
The Terminal Value 25

The Terminal Value 26

The Terminal Value 27The Terminal Value 28

 

Links of Previous Main Topic:-

Links of Next Financial Accounting Topics:-

How We Help With Homework

Our Workflow

5
Step 1

Submit your homework

  • Describe your task requirements, and set the deadline using our online form.

5
Step 2

Connect to qualified tutors

  • Receive instant quotes from experts. Pay using secure payment gateways.

Step 3

Get accurate solutions

  • Receive plagiarism-free solutions in your mentioned deadline. Unlimited free revisions included.

  • NHonest Pricing
  • NBetter Grades
  • NMoney-back Guarantee

Get Started with Help on Homework

Your Benefits

subjects covered

70+ Subjects

Our team of professional academic writers are experts in their fields and are well-equipped to handle any complex subject. You can always count on one of our specialists to assist you.

short deadline

Short Deadlines

We understand the importance of meeting deadlines and we pride ourselves on being able to deliver tasks quickly. No matter how tight the deadline, we will complete your homework on time.
chat with expert

Chat with Expert

Stay in touch with your expert by utilizing our secure chatboard for all your queries and concerns. You can easily check progress and make sure your work is on the right track.
free revisions

Free Revisions

We strive to ensure complete customer satisfaction. We offer free revisions to make sure our clients are happy with the final product. Your satisfaction is our top priority.

High Student Satisfaction

70% Repeat Customers

five star rating
help with homework

Frequently Asked Questions (FAQs)

Our Answers to Your Questions

C
E

How do I submit my assignment?

Getting assignment help is very simple with us. Students can either send us the homework via email or they can upload it to our online form here. For a quicker response, You can also chat with us at WhatsApp and submit homework directly. You are sure to get a response from our side within 10 minutes. You can pay for your order using secure PayPal or major credit card gateways.

C
E

Who will do my homework?

All our tutor experts are highly qualified professionals – holding at least Master’s degree in their fields. Currently, our tutor pool is made of 400 subject-specific experts.

Each expert has been individually chosen after a series of rigorous screen tests, which involves credential checks, work history analysis, writing sample assessment, and one-on-one interviews.

C
E

How much will my homework cost?

Each assignment is quoted a unique price. It is based on (i) complexity of task, (ii) your deadline and (iii) tutor’s estimate of the time it will take them to complete your homework. There are no obligations, and you are free to discuss the price quote with the tutor.

We also accept partial payment to start working on your assignment help. You can pay the remaining amount when your task gets completed. No pressure of up-front payment. No hidden order costs. We do not have a monthly fees or minimum payments for services.

C
E

Can I pay someone to help me with my homework?

Yes, you can pay online tutors for homework help. There is nothing wrong with asking for help from trained and professional subject tutors to clarify doubts regarding any assignment or coursework.

C
E

What mode of payment is acceptable?

There are several ways to pay for homework help:

  • Credit/Debit Card: You can use your credit or debit card to make a payment online. We accept VISA/MASTERCARD/AMEX.
  • PayPal is a secure online payment service that allows you to pay for essay writing services using your account balance or linked bank account.

C
E

Can I chat with my tutor?

Using our secure chat board, you can now chat directly with your assigned tutor. The chats are encrypted both ways to secure your privacy. This makes your contact with the tutor directly & confidentially, so you can better explain any requirements or changes if needed or just need updates.

You can't contact the experts outside of chat board platform. Sharing any personal information, including but not limited to contact information, goes against our Terms and Conditions and therefore may result in permanently blocking you from the platform. We take any personal data very seriously and we do it for the safety of our users.

Know more about chat board here.

C
E

Can I get free online homework help?

Our homework services are not free because we provide customized, high-quality homework solutions. We have a prepaid system that ensures professional homework helpers are paid fairly for their work and time. We believe that the value of their expertise and the effort they put into crafting each assignment justifies the cost of our service.
C
E

Is My Homework Help Legit?

My Homework help is absolutely legit! We are the leading providers of college homework services since 2012. We connect you with experienced tutors for your assignment and make sure you get completed answers before deadline. Our guarantee is high-quality assignment solutions or your money-back. It’s that risk-free! Furthermore, everything about you is kept confidential.

C
E

Can I trust you for homework help?

My Homework Help is absolutely reliable. Students of the world's top universities use our services and 50% of our customers are repeat customers. Our ordering process is very simple & transparent. There are no hidden fees or subscription anything like that. You can also request a refund if you think that our expert wasn’t able to meet your requirements. Your prime satisfaction is our end goal!

Know more - How it works

C
E

What about privacy & confidentiality?

Using My Homework Help is absolutely safe. We care about your security, therefore we encrypt all personal data to make every user feel safe while using our services and we don’t share any personal information with any third parties without your permission. Your credit card information is not stored anywhere at My Homework Help, and use of PayPal relies on their secure payment networks. Your identity, payment and homework are in safe hands. You can always be certain of getting professional help and remaining anonymous, while using My Homework Help.