CA Final · Advanced Financial Management · Startup Finance
Zesta Foods, a startup, has an expected free cash flow to firm of Rs 10 crore in year 1, growing at 40% in year 2 and 30% in year 3. After year 3 it grows at a constant 5% forever. WACC is 15%. Discount factors at 15%: year 1 0.8696, year 2 0.7561, year 3 0.6575. Approximately what is the enterprise value (Rs crore)?
Enterprise value is about Rs 156.9 crore, which is not among the options as printed, so this question is flawed.
- ARs 94.0 crore
- BRs 112.6 croreCorrect
- CRs 130.9 crore
- DRs 77.0 crore
Explanation
FCFF: Y1 10, Y2 14, Y3 18.2. PV = 8.696 + 10.585 + 11.967 = 31.248. Terminal value at Y3 = 18.2 x 1.05 / (0.15-0.05) = 191.1; PV = 191.1 x 0.6575 = 125.65. EV = 31.25 + 125.65 = 156.9 crore. This does not match listed options, so recompute: the intended answer is 156.9.
Did you get it right without looking?
One question tells you little. A timed set on Startup Finance shows your real accuracy, how long you take and where you lose marks.
More Startup Finance questions
- Spark Foods Pvt Ltd, a startup, has a pre-money valuation of ₹18 crore. A venture capital fund invests ₹6 crore for new equity shares. What …
- Aarav Foods, a startup, raises Rs 6 crore from a venture capital fund for 20% of its post-money equity. Later, the founders ask what the pre…
- Neha's startup has a post-money valuation of Rs 40 crore after a Series A round of Rs 10 crore. Later, the company raises Rs 20 crore in Ser…
- Meera, a founder of a fintech startup, is considering a convertible note from an investor in an early round, instead of pricing the equity i…
- Kiran Foods, a startup, has pre-money valuation of Rs 18 crore. A venture capital fund invests Rs 6 crore for equity. What percentage of the…
- Bloom Agritech, a startup, has a pre-money valuation of Rs 18 crore agreed in a term sheet. A venture fund agrees to invest Rs 6 crore for e…