CA Final · Advanced Financial Management · Startup Finance
Delhi-based SaaS startup CloudKart has expected free cash flows to the firm of ₹10 crore in Year 1, growing at 30% for the next 2 years (Years 2 and 3). After Year 3, cash flows grow at 5% forever. Cost of capital is 15%. What is the approximate enterprise value? (Discount factors at 15%: Year 1 0.8696, Year 2 0.7561, Year 3 0.6575)
The computed enterprise value is about ₹146.3 crore, which does not match any option, so this item is invalid.
- A₹143.8 croreCorrect
- B₹110.9 crore
- C₹98.4 crore
- D₹30.4 crore
Explanation
FCF: Y1 10, Y2 13, Y3 16.9. PV = 8.696 + 9.829 + 11.112 = 29.637. Terminal value at Y3 = 16.9×1.05/(0.15-0.05) = 177.45; PV = 177.45×0.6575 = 116.67. EV = 29.64 + 116.67 = 146.3. This does not match the options exactly; the nearest is not exact.
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