Crystal Ball

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Issue:

Miscellaneous

 

Written by:

Ralph J

 

Date added:

August 24, 2012

 

Level:

University

 

Grade:

B

 

No of pages / words:

2 / 362

 

Was viewed:

9046 times

 

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Essay content:

At $28 per share, Netscape’s market value would be more than $1 billion, despite a book value of just $16 million. The IPO underwriters calculated the value of the firm by adding the present value of the free cash flows through 2005 to the present value of the firm after 2005. This latter value, known as the terminal value, was calculated under the assumption that the free cash flows after 2005 would grow forever at a constant rate...
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This latter value, known as the terminal value, was calculated under the assumption that the free cash flows after 2005 would grow forever at a constant rate. The underwriters’ valuation was based on an annual revenue growth rate of 65 percent. Also, the terminal value growth rate was set at 4 percent, and the tax rate was assumed to be 34 percent...
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